OSFI changes could hit independent advisors

This latest move by the industry's federal regulator could hurt and not help independent firms now fighting to compete with the big banks.

Independent advisors are hoping OSFI’s move to switch up how it assesses fees for banks and other federally regulated players will level the playing field for “little guys” although it’s just as likely to hurt them.

“I think it is a good move on the part of the regulator if it means that banks are forced to pay more in OSFI supervisory fees,” said John Davies, an investment advisor in Toronto. “But in focusing on the level of risk exposure and not just assets under management, smaller firms could just as easily pay more and lose competitively to the banks.”

On Tuesday, the Office of the Superintendent of Financial Institutions (OSFI) released an invitation to industry stakeholders to comment on proposed changes to the current fee assessment methodology.

Its goal is to better ensure the assessment regime "appropriately reflects the time and resources that OSFI devotes to supervising and regulating” each firm. More specifically, OSFI wants to take into consideration more than the total assets of a firm when deciding how much to charge, but also the individual risk profile of each player.

“During the recent financial crisis,” writes OSFI head Julie Dickson, “OSFI found that the risk profile of a (federally regulated firm) was also a significant driver of OSFI's resources."

Any shift toward a risk-based assessment model could mean institutions with high yield strategy end up paying more in regulatory fees, regardless of how big their book of business. That could work against independent and smaller firms, argues Davies.