Dealers need to better align industry and investor interests

“Building a culture of compliance that aligns the interests of industry participants with the interests of their clients (retail and institutional) is critical to the long-term health and viability of the industry — and the way the industry is viewed by investors,” she said.

She noted that public confidence in financial markets was shaken by the financial crisis, which sparked reform efforts worldwide to strengthen the financial system and bolster confidence. And, in her speech, she called on the industry to support those efforts.

“Only by working together can we collectively raise the bar and inspire investor confidence. Professionalism and proficiency matter — now more than ever,” she said, noting that the goal of ensuring the industry puts client interests first has been at the heart of recent reforms in the U.K., Europe and Australia.

“To promote confidence in the quality and integrity of investment advisors as a ‘profession’, putting client interests first must be a priority for industry participants,” she said.

Wolburgh-Jenah stopped short of staking out a definitive position in the ongoing debate over the possibility of introducing a fiduciary duty for investment advice in Canada, noting only that the discussion may be useful, if the industry responds to the issues being raised. “This period of debate and consultation is healthy and will be beneficial if market forces and industry take the intervening opportunity to respond to underlying regulatory concerns and investor needs,” she said.

Next: Professionalism
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Professionalism

One area of emphasis for IIROC in this regard, she noted, is the standards of professionalism and proficiency for advisors. “This ‘educational mandate’ is critical and, in my view, attracts insufficient attention in the current debates,” she said.

To that end, earlier this week, IIROC published new guidance for dealers on the use and supervision of business titles and financial designations because, as Wolburgh-Jenah noted, “With so many titles in use, it can be overwhelming for investors to understand what they mean — transparency can be an ally in increasing clarity and understanding about the services that registrants are trained to provide and that retail investors can expect to receive.”

Financial planner is a title that has recently attracted particular attention once again, with the government in Ontario contemplating regulation in this area. On that issue, echoing the theme of her remarks, Wolburgh-Jenah suggested, “Consistent proficiency, ethical and professional requirements for those who hold themselves out as ‘financial planners’ would have important benefits for investors/consumers and the financial planning community itself.”

Indeed, she stressed that the industry must help the effort to bolster standards of proficiency and professionalism. “As regulators, we can set proficiency standards and mandate continuing education, enhanced disclosure and the importance of ethics. But it is up to the industry to embrace these principles and foster a culture of commitment to ongoing training, transparency and compliance,” she said.