Regulators take heed: financial advisors support a “best interest” standard and you should, too.

In a supplementary question added to this year’s Report Card series, Investment Executive’s research journalists asked advisors from the

four major retail distribution channels brokerages, mutual fund and full-service dealers, banks and insurance agencies whether they support the introduction of a best interest standard for client/registrant relationships. Resoundingly, and somewhat surprisingly, the answer was yes.

In fact, about three-quarters of the advisors surveyed in this year’s Report Card series said they favour a regulatory requirement to put clients’ interests before their own. This view is shared by advisors in all four channels, and it spans the country as well.

This broad-based backing by advisors for mandated higher conduct stands in stark contrast to the loud resistance from the investment industry’s firms and the trade groups that are paid to represent their interests.

Of course, management and front-line advisors approach this matter from different perspectives. Firms resist most regulatory change, as they fear it can only add costs and pose an unwelcome risk to their business. In contrast, advisors many of whom believe they already work in their clients’ best interests tend to focus on the upside that can come from raising the regulatory bar.

Advisors who support a best interest standard are clear that they view this proposal as an opportunity to enhance the industry’s image, curb competition from unethical rivals and bring the regulatory regime in closer alignment with client expectations. Many advisors say it’s the right thing to do.

Unfortunately, most regulators remain in the thrall of industry management and the desire to regulate to the lowest common denominator. So far, only Ontario and New Brunswick have pledged to support a best interest standard. Hopefully, the recent insight into advisors’ views on the issue will open some eyes at the regulators. Industry management might be afraid of tougher conduct standards, but now we know that advisors are not. It’s time for regulators to find their courage.

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