After 5 tortuous years of discussions between public safety advocates, regulators, banks, insurance cos and other investment dealers, yesterday the Canadian Securities Administrators (CSA) caved. They announced that all provincial regulators, except the Ontario Securities Commission and the Financial and Consumer Services Commission in New Brunswick, will scrap plans to introduce a standard requiring those offering financial advice to put their clients’ best interests ahead of sales targets.
This is all extra nauseating, coming as it does, after the latest whistle-blower reports about the aggressive, self-focused sales culture driving Canada’s largest bank and investment dealer recommendations today. See ‘A very disheartening day’:
“This is a very disheartening day,” said investor advocate Ken Kivenko. “Things are definitely not working for Canadians who trust the financial advice they’re getting.”
Go Public has heard from employees at Canada’s big five banks and other financial institutions who admit they often put people’s money into mutual funds and other investments that will generate sales revenue, commissions and management fees but that often aren’t the best option for the client.
The vast majority of investment “advisors” in Canada are actually salespeople — only advisers spelled with an “e” have a legal duty to act in a client’s best interest.
So long as the public continues to accept financial advice from the sales force, individuals will continue to suffer from capital mis-allocations, excessive risk exposure and compound losses over each full market cycle. The only hope is if the public demands change while voting with their money–refusing to accept advice from those who do not operate under a fiduciary duty. Eyes wide open.
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