Although 82% of Canadians over the age of 55 believe their financial advisors already act in clients' best interest, a significant majority support several key proposed measures that would lead to major reform in the way the financial services sector operates, according to the results of a new poll from the senior-advocacy group, CARP.
Namely, the survey, which is based on the responses of roughly 1,900 CARP members across Canada, finds that 89% of those polled are in favour of a best interest standard that would require advisors to prioritize clients' interests above all other considerations, namely their own compensation, when making investment recommendations.
"These poll results reiterate what we've repeatedly seen in surveys of our members," says Wanda Morris, CARP's vice president of advocacy, in a statement. "Investors overwhelmingly support changes that will better protect their life savings."
The high degree of trust older Canadians' already place in their advisors may be attributed, in part, to the CARP survey's finding that about 60% of survey participants were previously unaware that the majority of advisors aren't bound to uphold clients' interests ahead of their own.
The poll, conducted from March 10 to 29, comes at a time when Canada's financial regulators are considering following the lead of countries such as Australia, the U.S. and the U.K., which hold advisors to some form of fiduciary duty or best interest standard.
Debate over the introduction of such a standard, CARP notes, stems as far back as January 2004, when the Ontario Securities Commission (OSC) released a consultation paper examining the issue. Since then, there have been ongoing consultations and roundtables, which have spurred some "resistance" within the investment industry.
Canada's fragmented regulatory landscape has made it challenging for a sweeping consensus to be reached. In June 2016, the OSC published a statement, signalling that it could move forward on its own to implement the best interest standard in Ontario as other regulatory bodies consider its impact.
"When it comes to protecting investors, we are an international laggard," Morris says. "I believe that opponents of reform have used studies and consultations to indefinitely delay meaningful action."
Meanwhile, on the issue of banning embedded fees, another proposal up for regulatory consideration, CARP's survey suggests that 79% are opposed to embedded fees, with 53% expressing a "strong" degree of support for its elimination.
Under this proposal, trailer fees and other embedded commissions would cease to be attached to the mutual funds that investors purchase.
Although 44% of older Canadians surveyed were unaware that advisors collect embedded fees, CARP argues that scrapping these fees will help reduce the conflict of interest advisors may face. Moreover, about 62% and 31% of participants say they "strongly agree" or "agree" the commissions that advisors are paid should be disclosed.
As well, the CARP poll finds that 89% of those surveyed either "agree" or "strongly agree" with regulating the titles of those qualified to sell investments to the public.
This proposed reform, for example, would tighten rules around who can claim to be a financial planner. As it stands, anyone can claim to be one without having gone through the requisite certification or educational training.
"I've spoken to members who have placed undue trust in financial advisors because their titles, such as vice president or seniors specialist, implied a level of competence and a duty of care that was unwarranted," Morris says.
Earlier in March, Ontario Finance Minister Charles Sousa pledged to consult with regulators on applying restrictions to the use of titles tied to financial planning in response to a government-commissioned independent committee review.
With files from James Langton
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