Clever Marketing 101: Davis Rea talks fiduciary duty

The debate over the need for a fiduciary standing in the wealth management industry seems to be on the back burner. Clever wealth management capitalizes on perceived regulatory lassitude.

Did you see the interesting ad in this weekend’s Globe and Mail? Davis Rea, a well-known Toronto wealth management firm, ran a large colour advertisement talking about the firm’s presumed fiduciary duty to clients.

This is interesting. It is not often wealth management firms run ads in major media outlets like the Globe. But maybe this is our new world. The baby boomers are retiring at a rate of 1,000 a day in Canada. More people need help retiring every day. There is a massive amount of wealth in need of management. Wealth management firms are becoming a bigger part of the day-to-day business in this country. So maybe the ad makes sense: This is a part of the ongoing mainstreaming of wealth management in Canada.

But what was really interesting about the ad was the content. The ad played on the fears investors might have around the fact the debate around the need to adopt a standard of “fiduciary duty” on Canadian advisors seems to have stalled in this country. The ad includes a clever tag line, “The F word and why we swear by it.” The copy goes on to suggest that Davis Rea is moving ahead of regulators on this account. “Canadian regulators toy with the idea of applying a fiduciary duty on the entire industry, we’re already abiding by the mandate to put your welfare ahead of ours,” the ad reads. Which is smart: This is ahead-of-the-curve marketing on the part of Davis Rea. It also happens to capture, accurately, the state of the debate around fiduciary duty in this country.

Today, of course, a debate is playing out over the obligations and duties that advisors have to clients. In the US, UK and Australia there have been ongoing attempts to apply a “fiduciary duty” to advisors. In Australia, the previous Labor government brought in tough new regulations on advisors. But the new requirements seem about to be reversed, including a requirement that firms act as fiduciaries for clients. In the U.S., the U.S. Securities and Exchange Commission have recommended a fiduciary standard be adopted for broker-dealers and investment advisers. But the proposals have been stymied by pushback from the industry.

Here in Canada it seems the debate over the need for a fiduciary standard is lagging. A couple months ago WP did a few stories on the state of the adoption by regulators of a fiduciary duty in Canada. Basically, it seems that the debate has been put on the back burner. Some suggest it is wise to let the new regulations on customer relationship management—the so-called CRM2 regulations—work through the system before tackling the need for a fiduciary standard. This makes sense. And a recent report from Torys LLP suggests that the Canadian system is unlike the situation in the US, UK and Australia, in that the Canadian system is one that effectively applies a fiduciary standard of care on clients. And yet the debate goes on.

As one source suggested to WP a couple months ago the average Canadian would likely be surprised to find there is no fiduciary duty enacted by law on financial advisors. “Most Canadians seem to think that advisors are regulated like doctors and lawyers are. They are typically surprised to find that this is not the case,” said the source at the time. As the Canadian population continues to age, as more people become reliant on investment income, as more Canadians wonder about the pressure some advisors feel to slot clients into propriety product, as boomers age and begin to ponder the finer points of wealth management, the debate is sure to come back. Kudos to Davis Rea for getting out in front of the debate and coming down solidly on the right side of a question many Canadians are likely surprised is still being (or not being) debated. 
This is a debate that will, no doubt, return in the years ahead. The boomers are retiring in great amounts. Now that they’re no longer working, and dependent on cash flow from savings, this growing group of people is going to be pondering the subtle and finer points concerning management of their retirement funds. The wealth management sector is growing in terms of visibility, influence. The recent ascension of Victor Dodig to head of CIBC bank is, arguably, part of this trend. This weekend’s ads by Davis Rea are a novel and clever way of getting out in front of the debate that is increasing one Canadians will be thinking about. Kudos for Davis Rea for getting out in front of the debate and defining the conversation on their terms as it begins, for not waiting until the conversation overtakes them.