"Investor stakeholders" are calling for a sea-change in advisor accountability, according to a consultation update from the CSA, released Tuesday.
"Investor stakeholders" are calling for a sea-change in advisor accountability, according to a consultation update from the CSA, released Tuesday.
"Investor stakeholders strongly believe that advisors should be required to act in their client’s best
interest and that a statutory best interest duty must be introduced in order to protect investors," reads the report from the Canadian Securities Administrators (CSA). "They point out that a best interest duty would be consistent with investors’ general expectations, as shown by recent investor research that found that most investors believe advisors already have a legal duty to act in their best interest."
In the view of stakeholders responding to the CSA's call for industry and investor input, a best interest duty addressing issues relating to conflicted remuneration, including embedded commissions, would reduce bias in advisors’ investment recommendations.
Ostensibly, that would make recommendations more objective and would at the same time eliminate much of the need for conflict disclosure -- something investor advocates argue is currently flawed and ineffectual.
Some investor stakeholders also called on the CSA to overhaul embedded advisor compensation. Those concerns, according to the report, have been compounded by other potential areas of concern about the advisor-client relationship, including confusing advisor titles and low advisor proficiency (continued on Page 2).
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Industry titling continues to be a primary area of confusion.
"These investor stakeholders ... urge the CSA to standardize the professional titles and designations that advisors may use so as to ensure they more accurately reflect the scope of an advisor’s services and do not denote expertise that the advisor may not have."
Some suggest that the use of the title “Financial Advisor” by a product salesperson, who is
trained solely to deliver trade suitability rather than financial planning and/or ongoing investment
management advice, has resulted in confusion and a distinct disconnect between the level of
service many investors expect from their financial advisor and the actual service provided.
"These investor stakeholders therefore submit that title and holding out restrictions should be put
in place to allow the public to clearly distinguish between those who offer advice limited to trade
suitability and those who provide more extensive advice ommissions," says the CSA update.
