Senior investor group backs advisor regulatory amendments

The group is supporting the CSA’s proposed enhancements to advisors’ obligations to clients

Senior investor group backs advisor regulatory amendments
In a submission to the CSA’s Consultation Paper 33-404, national investor association CARP gave positive feedback on the regulatory group’s proposal for an increased fiduciary standard to better protect investors.

“The [current] suitability standard is unacceptable,” said the group’s statement submitted on September 30, which was the deadline for comment. “Financial advisors should be recommending the product that is ‘best suited’ for an investor, not merely one of several suitable options that may result in a higher commission for the advisor.”

Self-regulatory and industry organizations regularly accommodate and are informed of investor complaints, ranging from issues of non-suitability of products recommended to more serious allegations in MFDA enforcement cases. Despite this, CARP members reportedly believe that their advisors are already required to act in their best interests. “If this is the belief among Canadians, but not the reality, there is a serious problem,” the statement read.

Other stakeholders, many of them registrants and industry players, have opposed the proposed fiduciary measure, saying that imposing a new best interests standard would result in confusion. But the group disagreed, pointing out that the FPSC already has a definition of best interests in place, to which CARP would suggest an additional criterion that financial advisors “act in accordance with the spirit and principles of the law.”

To ensure more transparent product advice for investors, CARP suggested that financial service companies with a limited range of financial products “should be required to explicitly inform investors in writing that they only offer a select line of products and there may be other products available that are better suited to the investor.” The group also asks for increased accountability, asking that firms who employ misbehaving financial advisors also be held accountable for the advisors’ actions.

Citing a recent poll that revealed an inability among their members to distinguish between different titles and designations currently used, CARP supported the proposal to simplify and clarify them. They suggested several measures to make this happen, such as distinguishing between providers of broad financial advice and specific investment advice, control in titles and designations for such consultants, and imposition of educational requirements to justify titles and designations.

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