Give the Canadian Investment Regulatory Organization (CIRO) credit for recognizing that its advisor incorporation proposal required a longer-than-usual comment period. It doesn’t close until Nov. 6, a full 120 days after the self-regulatory organization tabled its plan in July.
The proposal addresses a disparity made unsustainable by the merger of the Investment Industry Regulatory Organization of Canada (IIROC) and Mutual Fund Dealers Association of Canada (MFDA). IIROC did not allow advisors to incorporate. MFDA had a directed commission rule that allowed some advisors to have commissions paid to an unregistered corporation under their control.
That inequity is unsustainable, and CIRO is right to propose a more level playing field. We expect advisors and their firms to comment in favour of the proposal, and for it to progress to the policymaking stage.
But it would be a mistake not to consider how this shift will affect investors and their perception of the Canadian wealth management industry.
If this makes it easier for reps to protect themselves from regulatory or legal fines, penalties, etc., then CIRO and the Canadian Securities Administrators (CSA) — which will be accountable for the proposal’s approval — will have made a terrible mistake. Ken Kivenko made this point for us in November.
That’s an unlikely outcome, given the obvious harm it would do.
What’s more likely is that advisor incorporation will proceed, and that the announcement will receive a small amount of coverage in the consumer-facing financial press.
It will be presented as good for advisors, and therefore good for investors. Regulators will argue that the change allows more advisors to operate in a tax-efficient manner, which will make professional financial advice more accessible to Canadians.
Investors will scoff. They won’t do anything about it, but they will roll their eyes and trust financial advisors just a little bit less. That matters at a time when investors have more choices than ever, from low-cost online brokerages to increasingly sophisticated AI-powered planning tools.
The percentage of adult Canadians using a financial professional — about 38%, according to FP Canada’s 2026 Financial Stress Index — remained steady, even as app-based trading took off during the pandemic. But as AI becomes increasingly adept at financial planning, wealth managers should be wary of reputation risk.
Proceed with caution
Here’s what regulators should do as they move forward with incorporation.
First, CIRO’s proposal maintains the responsibility dealers have in the client-rep-firm relationship. This must be preserved explicitly and communicated to the public.
The CSA will decide whether advisor corporations are registered in a new category or exempted from registration. CIRO’s proposal works in either scenario.
The two models can produce different results, based on regulatory jurisdiction and more. It’s up to the CSA to ensure that whichever it chooses, dealer liability is preserved and investors are protected.
Second, measures should be taken to ensure that if other financial services are offered by an incorporated advisor and not backed by their dealer — insurance and financial planning, for example — the advisor is not able to use the incorporation model to avoid paying a regulatory penalty or court-ruled investor damages.
That means requiring incorporated advisors to at least carry professional liability insurance at prescribed minimum limits and maintain minimum levels of capital or net assets.
The consultation ends in November. The harder work begins after that. Advisor incorporation will require legislative and regulatory changes well beyond CIRO’s rulebook. That’s where investor protection must be built in and communicated clear to the Canadian public.