Advisors anticipate scathing report on embedded commission

The first report from the CSA may have done little to address compensation but the final one will slam embedded commission, say fee-based planners

As summer draws to a close and advisors begin to get their offices back up to full speed, the subject of fees is once again on the mind of financial professionals across the country.
Will the Cummings Report do what the Brondesbury Report wouldn’t? Will the professor provide the CSA with the damning evidence necessary to put an end to embedded compensation and the conflicted advice that experts believe commission-based advisors provide.
“Many advisors will be ‘outraged’ [when Cummings Report comes out],” said Burgeonvest Bick Securities portfolio manager John De Goey. “Folks like me will say ‘told ya’. The ‘debate’ about advisor bias will be re-ignited. At some point, these folks [embedded compensation advisors] are going to have to admit that the overwhelming weight of evidence shows that embedded compensation causes bias.”
It was thought that the Brondesbury Report would crack the bias issue wide open but that didn’t happen putting even greater pressure on the Cummings Report to deliver solid evidence one way or the other so the CSA can act with conviction on the future of fees in this country.
Investor advocates are skeptical that the report will do anything to help regulators come to any kind of decision.
“We do not lack smoking guns and their respective corpses for they litter the financial services landscape,” writes Andrew Teasdale, a former UK financial advisor relocated to the Canadian market.  “What we lack is leadership, clarity of purpose and a commitment to change.
“The end of commissions will ‘eventually’ come in Canada, but the industry structure here is very much predisposed to commissions. I see no political backing for this change in this country which is different from say the UK, Australia and the Netherlands.”
While fee-based advisors welcome the Cummings Report with anticipation, the actual findings may just leave them in the same position following the release of the Brondesbury Report.