Feds to consider expanded services from banks, fintechs
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The proposed ban on embedded commissions represents an attack on financial advisors’ business model and will create an uneven playing field that will benefit the banks, said Scott Findlay, president and chairman of Independent Financial Brokers of Canada (IFB), at the association’s Spring Summit in Toronto on Wednesday.

“There has never been a more important issue in our industry, ever,” Findlay said. “A ban on embedded commissions is a fundamental ban on the way we do business.”

The potential ban, which is being considered by the Canadian Securities Administrators (CSA), would eliminate the form of compensation that most advisors rely on, Findlay said. That will force advisors to switch to a fee-based compensation model, collecting compensation directly from clients in exchange for their services.

As banks don’t require clients to make the same type of explicit payment for their investment services, the regulatory change may prompt more clients to invest with a bank instead of an independent advisor.

“[The banks] have the most to gain if this ban goes ahead,” Findlay said, adding that the result would be less choice for clients.

Although the CSA is only formally considering the proposal, Findlay said advisors should expect the insurance regulators to follow suit.

“Don’t think it’s just mutual funds,” he said. “If this ban goes through on the mutual fund side, regulators are going to be screaming that it has to happen on the insurance side.”

Read: Ban on embedded commissions could take toll on non-bank dealers

The CSA’s embedded commissions proposal is part of regulators’ growing focus on investor protection. Although that’s an important goal for financial services regulators, Findlay said they also have a responsibility to ensure an efficient and competitive marketplace.

The latter goal, he said, has been neglected as a result of the regulators’ fixation on investor protection.

“It’s time for the pendulum to swing back to the centre,” he said, “back to a world where the regulators balance consumer protection with a fair and competitive marketplace. All we ask for is a level playing field.”

Advisors need to voice their concerns with the proposed ban on embedded commissions, Findlay said, and educate regulators on the impact it could have on their businesses and clients.

“It’s time for us to get out in front of this issue,” he said. “We need to stand together, and make sure our voice is heard.”

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