Advocis warns that if regulators impose a best interest standard on financial advisors, they risk creating a "race to the bottom" where products are judged on price alone.
In a regulatory bulletin posted to its web site last month, Advocis responded to the policy recommendations made by Ontario's expert committee on financial planning.
Among other things, the Ontario’s expert committee recommended that the province create a uniform Statutory Best Interest Duty (SBID) that would explicitly require all financial advisors to act in their clients' best interests. The panel noted that it had received a number of submissions which suggested that advisors do not always recommend the most suitable products because they are influenced by commissions.
"Unnecessary and unhelpful"
Although Advocis agrees that financial planning should be a regulated activity, the association described the proposed regulatory framework as "fragmentary" and argued that this new SBID would be both unnecessary and unhelpful.
"We are firmly against the imposition of a statutory best interest duty," reads the bulletin. "The existing common law best interest duty continues to serve consumers well. Its guiding principles have been refined by decades of case law, so it is consequently able to accommodate the diverse spectrum of clients across the financial advisory and planning universe. A statutory best interest duty could very realistically set off a ‘race to the bottom’ where a product's price is the sole determinative factor in determining what the best choice is for a client."