Canada’s largest advocacy group for people over 50 has released the results of a poll that suggests older Canadians want better protection for their life savings.
CARP (formerly known as the Canadian Association of Retired Persons) is a non-partisan, non-profit organization that claims some 400,000 members. It has been a loud voice in favour of stronger investor protection. The group conducted an online survey of its membership last month, asking for their thoughts on the current state of investment-industry regulation. The group says 1,900 members responded, revealing:
- 89% support a best-interest standard;
- 79% are in favour of eliminating embedded fees in financial products; and
- 89% want regulation of titles used by people selling financial investments
Calls for a best-interest standard have been renewed following reports of Canada’s biggest banks forcing employees to push financial products on their clients. Currently, financial advisors are just held to a suitability standard, which advocates say exposes investors to products with hidden downsides.
The banks have responded to the news by saying that they do not condone unethical behaviour.
Among the CARP members polled, 53% strongly supported calls for a best-interest standard. “We've seen study after study on a best interest standard,” Wanda Morris, CARP's vice-president of advocacy, told CBC News
. “I think what we have is a situation where investors' interests are not coming first.”
The best-interest standard has not pushed through partly due to a lack of unanimous approval from provincial regulators. The BC Securities Commission, one of the standard’s most outspoken critics, has said “the proposed standard is vague, which will make it difficult to enforce” and “misleading for clients.”
As for the strong call to eliminate embedded fees, particularly in products like mutual funds and GICs, it may be because many poll respondents didn’t even know about them. “[A]lmost half of them [44 per cent] said they weren't aware that there could be a fee embedded in financial products that they own,” Morris said.
Studies suggest that mutual funds with the highest commissions are typically recommended, even though other research indicates that they perform very poorly.
Investment professionals pushing against fee elimination typically point to significant job losses that occurred in the UK: after the country banned embedded fees in 2013, the number of financial advisors there shrank from 40,000 to 31,000.
Eighty-nine per cent of the poll respondents agree that regulation governing titles used by people peddling financial products would result in more informed financial decisions. CBC News
previously reported that financial service industry representatives can have dozens of titles, but most are just licensed to sell without any obligation to protect clients.
“We think there should be far fewer titles," Morris said, "and that titles should clearly indicate when somebody is a salesperson or when they are providing financial advice.”
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