A consultation has been opened by the regulator amid growing usage
Canada’s investment industry regulator wants to get ahead of the trend for greater usage of DIY investment platforms with appropriate regulations for order execution only dealers.
A consultation period had been opened by the Canadian Investment Regulatory Organization asking for feedback from stakeholders including industry representatives, investor advocates and investors, on how to update its guidance for OEO dealers working with DIY investors.
The regulator wants to make sure self-directed investors can access quality non-tailored advice from reliable and verified sources and is keen to assess what low-cost tools could be provided by OEO dealers such as alerts, proactive notifications, educational information and self-help investing tools.
Recent data from FAIR Canada found that 45% of Canadian investors have some DIY investments and those that are DIY only have lower risk tolerance and confidence compared to those who also work with an advisor.
Alexandra Williams, senior vice-president of Member Regulation and Corporate Strategy at CIRO says the DIY investing space is its own landscape with investors making their own decisions often on the move while using their mobile devices.
“Being able to provide DIY investors with appropriate tools and information as well as a ‘speedbump’ alert if they are about to purchase a high-risk security or remind them that their cash accounts could be doing more for them by being invested, is something that many dealers want to offer. We see it as a win-win because it ensures investors can access high-quality financial information when and where they need it and also have certain protections in place,” Williams said.
BCSC research into what drives investors to opt for a self-directed approach found that although they have some goals aligned with those that work with advisors, such as retirement planning, they are more likely to also be aiming to boost income (hoping for large returns) or simply to have fun.
CIRO’s own research revealed that many DIY investors are relatively new to the markets, with four in ten having opened their accounts within the previous three years and that they are considerably more likely than other investors to use social media, internet forums or finfluencers as sources of investing information and advice, leaving them in the hands of unregulated platforms and potential misinformation.
“Protecting investors requires us as regulators to get ahead of and respond to changes in how Canadians invest,” said Williams. “Considering the popularity of DIY investing, updating the OEO guidance to clarify and enable certain forms of non-tailored advice will have a material impact on investors simply by improving the quality, kind and frequency of information available, so they can make better decisions for themselves.”
You can give feedback on OEO dealer guidance for DIY investors on the CIRO website.
