In an ironic twist, embedded-commission advisors are standing with the OSC in appearing to reject calls for a speedier review of trailer fees.
“I disagree wholeheartedly with the (idea of bypassing) the studies to determine the true consequences of banning commission-based advisors,” said Harley Lockhart, a wealth advisor at Quail Ridge Financial Services. “It’s one of the few things the OSC has done right and there is still no evidence to support a ban like this other than the ‘regulatory wave’ they point to, which is ridiculous. The OSC should investigate and complete the studies as intended.”
His comments come after the Investor Advisory Panel , which advises the OSC on investor protection issues, said that the OSC failed to address “inadequate and outdated regulatory standards” on investing advice and urged quick action to provide “fair, independent complaint handling.”
"We remain concerned that measures which could significantly improve investor protection continue to languish, subject to additional review and study, absent any specific commitments to action", said IAP Chair Connie Craddock in a release addressed to OSC Chair Howard Wetston.
While the panel is urging quick action against commission-based advisors the OSC is standing firm, waiting for the results of the studies before following the global regulatory wave banning embedded commissions, or trailer frees.
Critics have said that the payments provide embedded-based advisors with extra incentive to lock investors into funds that yield the highest trailer fees, as opposed to doing what’s best for the investor.
“Embedded commissions are nothing more than tied selling. Prohibiting these sales commissions will be an important step in transforming salespersons into professional advisors,” said Ken Kivenko, in a recent comment on a WP article. “This will help ensure more secure retirement incomes for Canadians.
“Independent academic research has shown that sales commissions can and do twist recommendations and that's not counting quotas and commission grids. A best interests-standard for advice givers is the only path to professionalism.”
However, Lockhart says there is no tangible evidence to justify these sentiments and believes that the attack against commission-based advisors is “illogical.”