Advisors identify conflict of interest

Advisors identify conflict of interest

Advisors identify conflict of interest
Even veterans of the fee-based model say it won’t be enough to protect clients from unscrupulous advisors fixated on investments.

“If you go to a bank and it shows that you have thousands of dollars in your account, the representative would ask if you want to open a TFSA, but at the same time they also know you have a credit card,” said Rona Birenbaum, a noted fee-based advisor with Caring for Clients. “They know that you pay 19 per cent of interest on that card, but will recommend you invest the saving in your account. I hear it all the time. The waters have really been muddied where people think fee transparency will solve conflict-of-interest issues, but that’s just not the case. You may know how much you’re paying if an advisor tells you, or has a responsibility regarding fee transparency but that doesn’t eliminate COIs.”

Her comments come on the heels of a report released by Kenmar Associates, citing a series of recommendations for the OSC and the industry such as establishing a seniors’ advisory committee to protect retirement funds, a crackdown on selling DSC funds, and creating an investor restitution fund.

“Much of the debate has centered on conflicts-of-interest and the argument that embedded commissions gives rise to conflicts-of interest and skewed investment advice recommendations,” the report notes.  “There is another important dimension to consider. Commission–based and fee-based advice can also cause excessive leveraging, discourage debt reduction, ignore household spending patterns and downplay savings (as opposed to investing).

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1 Comments
  • Kevin O'Brien 2015-04-10 8:13:28 AM
    Advisor's - either commission based of fee based can also cause:For the vast majority of Canadians - A secured retirement by encouraging contributions to RRSPs,advise on the proper asset allocation and risk tollerance for individuals we also encourage saving money,reduce debt, Help clients reach financial goas ( home, education, trips) properly protect families with insurance products and advice Canadians how to save taxes and to get Wills and POA for estate planning...and yet I see no mention of this in your article.
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