Advisors are being forced to adapt in what feels like a pivotal time for the industry
Advisors have been up against what seems like a constant barrage of regulatory upheaval in recent times. From the drawn out implementation of CRM2 to the floundering best interest standard and now mention of CRM3, regulators are trying to make their mark and it feels like a pivotal time for the industry. Advisors are being forced to adapt and hit more moving targets, but, on a fundamental client satisfaction basis, what impact do new regulations really have?
“Change is constant, but recent regulation changes have really hit home because they are more mainstream, everyone is talking about them,” says Jeffrey Wilson, an advisor at Sun Life Financial. “However, within the industry, it seems as though advisors are more panicked than clients are.”
Wilson has noticed an increase in questions from clients who have read an article or seen a news segment on the topic of financial regulation. Clients have access to more information than ever before and modern advisors have to manage their clients’ responses to media noise, and not just look after their investment strategy and portfolio. Many clients are now up-to-date with regulatory changes in the advisory world, which may not have been the case in the past.
“When a fresh bit of news is released, clients want to know what it means for them,” Wilson says. “All of the account information has always been available to clients but now it’s just more upfront. Statements didn’t used to show every fee, it said ‘fees inclusive’. Although statements now detail the gross income and then the deductions and net-out, the net rate of return is still the same.”
Although having access to more information is of benefit to certain clients, Wilson believes it could be detrimental to others. “It can lead to information overload,” he says. “Clients are paying for advice and that hasn’t changed. They now have more information in front of them and that may create more questions, but once those are answered clients are usually satisfied and the matter can be put to rest.”
In one of the more recent developments, the Investment Funds Institute of Canada (IFIC) requested a meeting of stakeholder entities to discuss a proposal for CRM3, which would extend disclosure requirements to reflect the full management expense ratio (MER) of investment funds. “It’s great to put proposals forward but if they don’t have people and systems in place to examine the information they’re attempting to collect or oversee, you end up with a backlog,” Wilson says.
“These regulations may dissuade people from joining the industry in the future. It’s hard to know if they’re good or bad, we’ll have to wait and see."
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