We agree that orderly implementation of securities law is a critical success factor, as stated by Paul Bourque, president and CEO of the Investment Funds Institute of Canada (IFIC), in his latest column.
What we don’t agree with is the example Mr. Bourque used. Discount brokers should never have collected trailers for advice, and mutual fund companies should never have paid those dealers from fund assets.
Regulators should have intervened over a decade ago when we and others identified the unfair and improper sales of series A funds in the order-execution-only channel. To its credit, IFIC in 2017 also identified this investor abuse and called for regulatory action.
Mr. Bourque rightly points out the significant resources the industry dedicated to solving a problem that should never have existed. The first rule of productivity improvement is “Don’t do effectively that which shouldn’t be done at all.”
The same is true for total cost reporting. If the industry had listened to their clients and investor advocates, total cost reporting would have been in place years ago. Some progressive firms already provide robust cost reporting. The industry must learn to better sense investor needs and not wait for regulators to initiate consultations and new rules.
Furthermore, industry systems need to be more proactive, responsive and agile. The industry is able to develop and launch new products quickly. It should apply the same innovative approaches to complying with laws and regulations expeditiously.
Slow response times often mean retail investors unduly pay the price of bad rules and high costs. All of the resources applied to the discount broker scandal will ultimately be paid for by investors.
We urge the industry to formally introduce continuous improvement programs, robust cycle time reduction initiatives, and client satisfaction metrics in its strategic planning. This creates a wonderful opportunity for IFIC committees to add value through sharing of ideas.
Constructive actions can improve the international competitiveness of the relatively expensive Canadian mutual fund industry.
Ken Kivenko is president of Kenmar Associates, an investor advocacy organization based in Toronto.