Canadian securities regulators finally released the results of their long-awaited, so-called, “mystery shop” exercise on Thursday. They made a number of key findings: that it is often hard for many investors to decide whether they have received suitable advice; that it’s difficult for them to understand the assortment of titles used by reps; and, that it is tough for them to comparison shop.

The results were contained in a joint report from the Ontario Securities Commission (OSC), the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada (MFDA), in which the regulators set out the results of an anonymous assessment of advisors that was carried out in Ontario between July and November 2014. (A market research firm carried out the “shop,” which involves researchers posing as prospective clients and recording their experiences when interacting with advisors.)

The data set out in the report is rather thin: only 105 mystery shops were completed, out of a planned 150 shops. Of those, only 88 yielded enough data for regulators to assess the investor experience (including 34 mutual fund dealers, 30 investment dealers, 11 exempt market dealers (EMDs), and 13 portfolio managers). Still, the report reveals that, while reps were likely to ask about investors’ objectives (89%) and to describe their products (78%), only 25% talked about advisor compensation, and only 56% were told about product fees. Just over half (52%) of clients had the relationship between risk and return explained to them. The report noted that there were no examples of serious misconduct that necessitated regulatory action.

“Regulators were able to conclude that investors would have difficulty comparison shopping, understanding the variety of business titles or knowing whether they received suitable advice,” they say. In particular, the report finds, “It is difficult for investors to comparison shop for financial advice, especially on important aspects such as fees and costs.”

The report also finds that the advice process varies among firms, and that it’s difficult for investors to know what to expect when they seek financial advice, or to evaluate whether they have received good advice. “Greater emphasis must be placed on improving the investor experience in the advice process through advisor practices that make it more accessible and understandable,” the report says: “Investors must be given better tools and support to seek out and receive good advice.”

Of the 88 shops that yielded adequate data, only 24 proceeded to the product recommendation stage, the report notes. And, of those, less than two-thirds of the time (63%) the process met all regulatory expectations.

The report reveals that 86% of the recommendations were suitable, but 14% were not. Thorough, know-your-client (KYC) information was only collected in 79% of the shops, the report says; and, an “appropriate” discussion of product fees occurred in 71% of the cases. Indeed, the research found that “suitable recommendations might be made based on an incomplete advice process where topics such as risk tolerance, fees and costs are not discussed.”

The MFDA says that, of the 11 mutual fund dealer shops that proceeded to a recommendation, only three demonstrated best practices, six were deemed compliant, and two were rated as non-compliant. Of the two non-compliant shops, the recommendations were suitable in both cases, the MFDA says. However, the advisors involved did not properly assess the investor’s risk tolerance, and in one case the rep did not discuss fees.

In the wake of the report, the regulators are calling on the industry to review its findings, and consider whether their own practices generate quality advice. “Investment industry firms and advisors should review and respond to the findings to ensure investors receive advice that is appropriate and leads to better investor experiences,” they say.

The regulators also say that they will be taking action to improve practices in the advisory business, and that the findings of the report will be used to inform further policy making. However, they stopped short of promising major reforms.

“This project has given us insight into what investors experience when making the important decision to choose an advisor. The results support our strategic focus on initiatives directed towards improving the investor experience in the areas of suitability, know-your-client, fees and the overall advisory process,” says Mark Gordon, president and CEO of the MFDA.

For now, regulators say they plan to increase their focus on KYC, KYP and suitability in their compliance programs and in their guidance, outreach and education efforts. “We are all committed to improving the advisory process and the overall experience investors have when seeking investment advice,” they promise.

The Canadian Securities Administrators (CSA) are already considering significant industry reforms — such as banning mutual fund trailer commissions and introducing a duty for advisors to make recommendations in the “best interests” of clients — but they have not yet committed to either step, amid other research efforts in this area. The mystery shop results will inform those deliberations, but it’s not clear whether they will push regulators to action.

In the meantime, in response to the mystery shop report’s findings, the OSC says that it will provide the industry with more guidance and education on its expectations for enhancing the advice process and the advisor-client relationship; that it will work with the MFDA and IIROC to reinforce best practices; and, that it will implement a targeted strategy to provide investors with tools to help them find, work with, and evaluate advisors. It will also consider further reforms in the areas of KYC, KYP, suitability and business titles.

The MFDA says that it will develop best practice guidance on the advisory process and on specific topics such as KYC practices and the transparency and suitability of fees and charges. It also plans to develop plain language communications for investors to enhance their understanding of the advisory process, along with existing efforts to improve the regulation of titles and to bolster advisor education.

IIROC also pledges to focus largely on enhancing compliance and improving education. It says it will also consider reforms to KYC requirements, and plans to develop guidance to help dealers train their advisors to better explain important KYC concepts to clients.