Leaders reveal themselves in pivotal moments. Mostly, they gravitate to the forefront, although some may prefer to inspire and lead from the rear.
No one leads or inspires, however, by sitting on the fence. Yet, that’s where some Canadian securities regulators remain in their seemingly endless meditation over whether investment advisors and dealers should be required to act in clients’ best interests.
Careful, cautious deliberation is one thing. But we’ve had years of discussion, submissions and studies. The regulators have consulted eminent researchers who’ve delivered reports with unambiguous conclusions. Three of the country’s most prominently active securities commissions have been able to solidify their own views on the matter and have, essentially, declared their positions. Their opinions aren’t uniform, but at least we know where they stand. It’s hard to see why the rest need to draw this process out further.
We all know the issue is complex, its implications profound. Everyone understands that the stakes are high. Still, those things don’t excuse this persisting reluctance to act. They don’t justify an endless spin cycle of enquiry or ceaseless fretting over unknown, unknowable and quite possibly phantom consequences downstream.
At some point, the analytical epoch must be brought to an end so that actual action can happen. Not timid action. Not half-hearted, ineffectual incremental steps. Not more disclosure that doesn’t have a hope of working, or a watered-down standard that would leave us with a second-best best interest duty.
The public has a right to expect more than that. People expect policy-makers to do more than just talk about what needs to be done. The expectation is that capital markets regulators will employ skill, judgment and good sense, but, above all, will act — and act boldly enough to truly and fully solve the problems they’re supposed to fix.
So be bold, regulators. Be bold enough to embrace the profound nature of this matter and use it as an opportunity. This is the chance to fundamentally realign regulation with the reality of the investment business today — the reality that it’s not about product selection but the provision of advice, and the reality of investor dependency on that advice. This is the chance to set our regulatory edifice on a modern and true-to-life foundation.
Be bold enough to face the fact, and the criticism, that such realignment will be disruptive; but stay focused on the acute need to foster objectivity in the provision of investment advice and the long-term benefits that best interests reforms will bring about for investors and for advisors yearning to become true professionals.
Be bold enough to dismiss alarmists who claim a best interests duty will destroy the investment business, and resist those who urge you to just make marginal changes rather than hard-hitting reforms that have real and practical impact on the root of the problem.
And be bold enough to do what needs to be done because it’s the right thing to do. Take the principled path, not just for itself, but also so that the disruptive consequences can more readily be seen and accepted as being necessary.
Remember, too, that the public doesn’t have infinite patience when it comes to the safeguarding of its interests. People expect regulators to protect them as an instinctive reflex; and there’s a limit to how long Canadians can hold those officials in high regard while they appear to dither over that task, or seemingly must be persuaded to do it.
In effect, therefore, the best interests window is closing on Canada’s securities regulators. At this pivotal moment, the table is set for fundamental and true reform by those unflinching enough to lead the way. But their chance on this issue could easily slip by, and certainly, if it doesn’t happen now, it’s unlikely to recur in our generation.
So, now is the time to climb down off the fence, to take action, to lead. The opportunity is passing. Now is the moment to be bold.