Ninety-six percent of financial advisors in Canada are registered as commission salespeople, according to a new report from the Small Investment Protection Association (SIPA).
“[W]hen you check your Advisor's registration and see that they are indeed registered, the probability is very high that they are registered as dealing representative or in plain language a salesperson,” the group said in a statement.
“Although advertising suggests the industry will look after client's best interests, the shocking truth is the investment industry is using a majority of commission salespeople to convince investors to buy their financial products,” they continued.
The group’s pronouncements are based on months spent compiling data from provincial securities administrators regarding the registration of representatives. Some were registered as “portfolio manager” and “advising representative”; registrants operating under these designations are required to look after clients’ best interests.
However, “the majority of representatives [are] registered as [a] ‘dealing representative’ or salesperson,” according to SIPA. Those operating under this title are not required to protect clients’ interests. Furthermore, the group said, such individuals are motivated through a system of rewards and incentives to push products that maximize commissions.
By not using representatives’ registered classification and instead using the title “financial advisor,” SIPA said, the investment industry appear to be violating laws as stated in the provincial securities acts. They also criticized the registration check system currently in place, saying that it “should be more user-friendly to enable investors to quickly determine a representative's true registration category and qualifications.”
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