Two investment industry groups appear supportive of certain regulatory changes to improve advisor-client relationships, such as requiring more straightforward business titles, but express concerns about some of the more fundamental reforms that regulators are considering.
The comment period provided for a set of reform proposals published by the Canadian Securities Administrators (CSA) wrapped up on Sept. 30, and a slew of submissions coming in on the deadline express a mix of support for the fundamental objective of enhancing client-advisor relationships, and trepidation about some of the CSA’s specific proposals.
The submission from Investment Industry Association of Canada (IIAC) indicates that its review of the CSA consultation paper identified “some areas of constructive reform,” but the industry trade association also questions the merit of some of the CSA’s proposals. In particular, the IIAC indicates that it would welcome measures such as enhancing proficiency standards, and clarifying the sorts of titles used in the industry.
However, “… many of the new proposed reforms, which contemplate fundamental regulatory intervention in most aspects of the industry, may result in unintended consequences which adversely impact the client-advisor relationship. These include introducing unnecessary complexity, uncertainty and cost to the established regulatory framework without providing meaningful benefits for investors, ” the IIAC submission warns.
The IIAC also reiterates its opposition to the introduction of a regulatory best interest standard. “The broad, sweeping and vague best interest standard has uncertain application which may lead to client confusion and cause negative consequences for investors — reducing choice among business models, reducing access to financial products, decreasing affordability of financial advice, heightening uncertainty with respect to client-advisor relationship obligations — resulting in onerous compliance requirements, and increasing exposure to risk and liability for advisors,” says IIAC president and CEO, Ian Russell, in a news release.
A submission from the Financial Planning Standards Council (FPSC) indicates the FPSC also supports the use of straightforward business titles in the financial industry, including a restriction on the use of the ‘financial planner’ title.
“FPSC believes that the financial services industry should use plain-language titles that clearly communicate to consumers what specific products a registrant is actually authorized to offer, and more importantly, what sort of advice they are qualified to provide,” the FPSC says in a news release.
This should include restricting the use of “financial planner” to “individuals who have completed an advanced certification in financial planning and who are additionally accountable and overseen by an expert professional body,” the FPSC adds.
On the subject of a possible best interest standard, the FPSC calls for more clarity from regulators.
“A best interest standard must clearly communicate the fact that a registrant’s ability to act in their clients’ ‘best interests’ is inextricably linked to their proficiency and qualifications, and thus what a best interest standard means for an individual and how they should act in accordance with it differs depending on what they are qualified to do and how they hold themselves out,” the FPSC says.
“FPSC believes that by implementing its proposed modifications relating to the CSA’s targeted reforms, a clear, principles-based best interest standard would be more workable.”
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