The Chambre de la sécurité financière (CSF) recently reaffirmed its support for commissions that are built into mutual funds.
In a speech to the Association professionnelle des conseillers en services financiers, a Quebec-based association of professional financial advisors, the CSF's CEO Marie Elaine Farley urged the Canadian Securities Administrators (CSA) to be cautious in their reforms. "Many studies show that doing away with them will limit access to advice, especially for small investors," said Farley. "They reveal that the Australian and British experiences have led to a 50% drop in the number of advisors."
The research also found that firms and advisors segmented their clients according to their assets. Farley notes that, in these countries, advisors have changed their approach to target higher net worth investors, and that one part of the population now finds it less well-prepared for retirement.
"The UK is now trying to put the toothpaste back into the tube with a program that invites investors to use the services of certified and qualified professionals, offering them a subsidy," noted Farley.
The experience in New Zealand
The CSF is sticking to its 2013 position, namely that it has serious reservations about banning commissions because doing so would have end up limiting access to advice. "We believe that the solution lies rather in ethical measures that govern conflicts of interest, and we are not alone," said Farley, who points out that this is the approach New Zealand has decided to take.
New Zealand is currently revising its legislation on financial advice, and chose not to abandon commissions. Regulators in that country believe that such a measure would not eliminate all conflicts of interest, "particularly in distribution networks where the compensation structure provides for bonuses and other incentives," explained Farley.