Advisors continue to ponder an uncertain future

Advisors continue to ponder an uncertain future

Advisors continue to ponder an uncertain future Michael Gentile is a financial advisor in Kitchener, Ontario. He’s been providing financial advice since 1974. The recent findings of the Brondesbury Report have many, including himself, especially frustrated by the lack of input requested from advisors in the compiling of academic research for the two reports commissioned by the CSA.

To say he’s miffed is an understatement. His main concern is what effect potential changes by regulators will have on the cost of advice to clients. 

“Various regulatory authorities and others (eg FAIR) have insisted on and are now in the process of implementing additional disclosure rules and are suggesting that embedded compensation should be eliminated, all the while adding additional layers of administrative costs,” Gentile told WP. “I personally have no objections to disclosure and taking steps to ensure that the investor is informed and protected. I do have concerns about what this will ultimately cost and whether or not the investor is prepared and willing to accept the increased expenses and taxes that will get added ie H.S.T.”

Opponents of embedded compensation feel there’s no room for any form of hidden fees in today’s wealth management industry, forgetting that even fee-based accounts have extraneous fees within them such as trading costs, the MERs of ETFs and mutual funds held, and other administrative costs assumed by the client.

WP has heard from many advisors who point out that ‘fee-based’ isn’t the same as ‘no fees’. Clients should have the option of which fee structure they use because the average Canadian is going to pay one way or another. It might as well be of their own choosing.

Terry Lynn Adamson, an advisor in Fonthill, Ontario, recently echoed the sentiment of many of our readers when commenting on a story about the Brondesbury Report.
“I was discouraged as well by the report. I am a Financial Planner first and foremost for my clients. Compensation is not how I choose the funds I use, and I always put the needs of my clients ahead of my own, as most of my colleagues do. But we also have costs to run a business, and need to be paid,” Adamson wrote. “The client still has to pay for the advice and service. My confidence that the regulators understand this business and understand what Canadians need dwindles more every day.”

The latest discussions surrounding the TFSA, whether it be the change of name proposed by many advisors or the general lack of knowledge and understanding most Canadians have regarding this product, puts a big spotlight on why regulators ought to think hard about any changes they make to compensation models in the future.

“The results of the Mackenzie survey [of Canadians’ TFSA knowledge] suggest to me that experienced and knowledgeable advisors provide a valuable service and should be compensated for the advice that enriches the lives of the clients they serve,” Gentile said. 
 
1 Comments
  • Tony Battista 2015-06-26 10:54:17 AM
    Would the Brondesbury Report peoples please disclose their compensation with a detailed account of their research, who they consulted and how many hours were billed for the study.
    Who asked for it and who paid for it? We never had any problem disclosing and discussing compensation and costs related to Mutual Funds, and neither offering clients a fee base for the bigger accounts. This Industry is working well, and it is doing a great job for Canadians. All Advisors except a small percentage (as in any other field) are honest hard working professionals. RCM2 wants us to be 100% transparent and disclose in details all the charges and make sure we negotiate a fee with clients, and billing the client. To us means additional costs and loss of time that could be dedicated to the client. Then if our industry goes this way also other industries should be the same. When I pick up a box of milk in the grocery store I want to know how the farmer justifies his price per liter, how much costs the transports and the processing and what is the cost and profits for each intervenient. I think it is time to react and call and write to Canadian and Provincial members of Parliament and voice our right to conduct business as any other industry. Why aren't Banks attacked on the exorbitant fees they charge? And why nobody asks for transparency on their activities? Banks generate billions in profits in good and bad economic times, why nobody questions their practise? I believe this RCM2 is chasing the wrong dog.
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