Proposed changes to financial advisor compensation models in other countries could have significant “game-changing” implications for the industry in Canada, according to Susan Wolburgh Jenah, president and CEO of the Investment Industry Regulatory Organization of Canada.

Speaking at the Canadian Institute of Financial Planners’ Annual National Conference in Niagara Falls on Monday, Wolburgh Jenah addressed recent efforts by regulators in Britain and Australia to reform industry compensation practices. These include a proposed ban by the UK’s Financial Services Authority on commissions and trailer fees paid to advisors by product manufacturers.


“If other Commonwealth countries…proceed down this path, I think it could have very, very important and significant implications,” Wolburgh Jenah said. “There is the potential for this to be a real game changer, in terms of how the industry is structured, how compensation is set up.”

Wolburgh Jenah said industry players in Canada would be wise to review their compensation practices to ensure that client and advisor interests are aligned. This alignment of interests is critical to the integrity and confidence of the financial planning industry, she said.

Canadian regulators are currently in the process of making their own adjustments to advisor-client relationship regulations for the industry. The proposed “Client Relationship Model” being developed in Canada seeks to achieve some of the same underlying objectives as proposed regulatory changes in the U.S., Britain and Australia, Wolburgh Jenah noted. The focus is on increased disclosure in three areas: account opening documentation; costs, conflicts and compensation transparency; and performance reporting.

IE:TV Australia to eliminate commissions: What’s the impact in Canada?


In the area of compensation, the proposed CRM rules would lead to better disclosure of fees and compensation, according to Wolburgh Jenah. She said IIROC is currently reviewing industry comments on the CRM proposals, and will issue a revised proposal in the near future.

On the topic of the regulation of financial planning as a profession, Wolburgh Jenah said she agrees that it’s in everybody’s interest for financial planning to be recognized and regulated as a profession.

“My own personal view is that that makes a lot of sense, because one needs to establish consistent standards for those who hold themselves out as being financial planners,” she said. “Steps in that direction would be a good thing for Canada.”

Regulatory reforms are a reflection of broader changes that are occurring in the industry, Wolburgh Jenah observed. For example, she said many IIROC member firms have become more focused on wealth management, moving away from the traditional commission-based business model, towards a fee-based model.

“Client needs and expectations are changing, and I believe [they] are driving these changes in the industry,” she said.

Proficiency standards for financial advisors represent another area that has come under scrutiny by international regulators recently, Wolburgh Jenah pointed out. She said that international studies have shown that, in comparison to other countries, Canada’s standards are “very robust.”

“The Canadian requirements compare very favourably, and in most cases, exceed the existing requirements in other jurisdictions,” she said.

A challenge for financial industry regulators, Wolburgh Jenah said, is keeping up with new developments in the rapidly changing industry.

“This is a very dynamic industry, and you can’t leave proficiency standards static over long periods of time,” she said. She encouraged IIROC member firms to continue updating their own proficiency standards on a regular basis as well.


logo• IIROC CEO on regulation in Canada, UK, U.S. and Australia
Susan Wolburgh Jenah, president and CEO of the Investment Industry Regulatory Industry of Canada, describes changes in compensation and client management regulation in Australia, the United Kingdom and the United States. In addition she discusses Canada’s “Client Relationship Model”. She spoke at the CIFPs conference on June 14. WATCH

IE