Greg Pollock and the people at Advocis seem to be confused.
On one hand, they have repeatedly called for the retention of embedded compensation — under the moniker of “client choice” — in order to “preserve access” to advice. On the other hand, they recommend higher advisory standards, which are bound to reduce the advisor population.
Indeed, Pollock and Advocis have repeatedly used the British experience with the retail distribution review (RDR, the U.K.’s new regulations for financial advice) to support their claims for the former matter, while simultaneously ignoring the latter.
The RDR simultaneously eliminated embedded compensation and raised proficiency standards. As everyone knows, correlation is not causation and the drop in the U.K.’s advisory population (and presumed, but unsubstantiated lack of access to qualified advice) may very well have been due to advisors’ inability to meet higher proficiency requirements. To hear Pollock tell it, the drop is entirely due to the removal of the embedded option.
My questions to him are these:
- How can he be sure that the drop in the advisor population in the U.K. was due to the ban on embedded compensation and not the raising of proficiency standards?
- If it is some combination of these and/or factors that led to the drop in the British advisor population, why does Pollock fail to acknowledge these other factors when he comments?
- To the extent that advisors left the business because of proficiency, is Pollock concerned? Specifically, if increased proficiency leads to fewer advisors, which leads to decreased access, which part of the trade-off does he feel is more important — access or proficiency?
My sense is that the people at Advocis want to have their cake and eat it, too. I’m disappointed that the media has never asked him to elaborate on what seems to be such an obviously contradictory position. Now would be a good time to get real clarity on this issue.
John De Goey,
Industrial Alliance Securities Inc.
Read a response to this letter from an advisor: Commission-based advisors can be held to highest standards, May 11, 2016
Read a response to this letter from the president of Rogers Investment Consulting: Proficiency, not commissions, reduces number of advisors, May 11, 2016
Read the response to this letter from Advocis: No confusion, Advocis says, May 12, 2016
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