Commission trouble brewing

Commission trouble brewing

Commission trouble brewing

Canadian security regulators have released their three year strategic plan, outlining mid-term goals and saying they will focus on protection of retail investors. Their plan indicates that best practice standards and compensation models will continue to be hot topics.

The Canadian Securities Administrators (CSA), the umbrella organization of provincial and territorial regulators, said its additional priorities include improving access to capital by small- and medium-sized enterprises, increasing shareholder democracy and protection, and ensuring the effectiveness of market regulation and enforcement.

“The plan sets out, in a clear and comprehensive manner, the priorities the CSA has committed to pursue over the next three years,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission. “The plan itself is not static and over its life will be supplemented and influenced by capital market events and regulatory responses to these events.”

The document, approved by regulators in June, covers the three-year period ending March 31, 2016. Many of the most detailed sections involve already underway initiatives – including a review of commissions and mutual fund fees, prospects for unified best practice guidelines, and enhancing disclosure on products such as mutual funds and ETFs.

Advisors are divided on what if any effect the loss or curtailment of embedded commission would have on their business. Still, it is something the CSA appears to be readying to address,

In yet another area, the administrators will look at improving capital access for SMEs. The plan is to continue to look for ways to further develop exempt market mechanisms and crowdfunding, where companies could raise cash from multiple investors via the Internet.

Other areas mentioned include a review of proxy voting systems, including proxy advisory firms, and reviews of trading and clearing systems.

2 Comments
  • Isaac 2013-07-10 10:15:43 AM
    can someone explain to me the difference between the current MF commission schedule and the dentist's fee schedule. Both are imbedded, both are across the board and both have no impact on the value & effectiveness of the service provider, yet it's fine for dentists but not for financial advisors.
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  • Christine 2013-07-26 9:30:53 AM
    Good question. And if this goes as far as fee for service only models, consider this..... A good client (500K) that I was trying to update on the subject said that if it comes to having to cut a cheque from her savings account to pay my fee for her RRSP, I'd be "let go." Embedded fees deducted from her RRSP makes sense to her, but diminishing her bank account by the equivalent amount does not and she said as soon as this becomes more than a possibility she will not add another dollar to her investments. There was no problem with my receiving my share of a 1% trailer but now that she considered my trailer fee in dollar terms, she likened it to a scenario where her Real estate broker knocked on her door every year on the anniversary of her home purchase asking for a cheque based on the growth of her home value, she said. Of course I know the differences and of course as a CFP (small book, working solely with FE 0% compensation), I do a lot more than simply choose funds for an RRSP, but I am still depressed one week later over how badly the conversation went, and how low it made me feel about the good work that I do for my clients.
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