In March, the Ontario government quietly released the Final Report of the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives, which the Liberals had been sitting on since November 2016. Whenever a report is released, without press, right before a holiday week like March Break, we should wonder what they are trying to hide.
This recent story by the CBC, about financial advisors with misleading titles, poor training and no fiduciary duty to act in the best interest of their clients, did not make reference to this Expert Committee report, which calls for a number of reforms to fix these problems. However, I was pleased to see this Globe and Mail article which reported on Finance Minister Charles Sousa’s announcement that legislation will be forthcoming to address the recommendations of the Expert Committee.
The talk about “Investor Protection” has been intensifying though it has often been just that – all talk and no action. Some change has started with the recent introduction of increased fee disclosure being one example. In my view, it’s about time that the policy makers start to act. Because of the low levels of financial literacy in society, coupled with the increased responsibility foisted upon individuals to secure their own retirement savings (where did all the DB pension plans go?), there is a growing need for advice and assistance.
Unfortunately, the financial services industry has a poor reputation for putting the customer first. This, along with a lack of uniform regulation across jurisdictions and product lines, has lead to confusion, abuse, distrust, and ultimately individuals not taking advantage of the very products designed to help them meet their financial goals.
The solution, per the Expert Commission, is a “tripartite” approach of harmonized regulations, prescribed use of titles and credentials, and a statutory best interest duty. They submit that these changes, taken together, will have the following desired outcomes:
Consumers of financial products, often because of their very low levels of financial literacy, frequently presume that the financial advice that they are receiving is in their best interest. According to the CBC story, only about 4,000 of the 121,000 individuals registered as financial professionals in Canada owe a fiduciary duty to their client. This “expectations gap” is a big problem and a uniform statutory best interest duty would go a long way to elevate the standard of care in the consumers favour.
Now, the trick in all this appears to be the implementation. Let’s hope that the Ontario Liberal government can move this along in a timely fashion, and who knows, perhaps they can not only convince the various regulatory bodies to work together for Ontario consumers but spread the good word across the country.
On a related note, besides constitutional history, can someone please explain to me why we need different financial regulations in each province? You would think that in today’s world it would make much more sense to have a single national financial services regulator!