FAIR Canada has commended regulators for pursuing reforms that would better align the interests of the client and advisors, but strongly believes that a statutory best interest standard is not only necessary but feasible.
FAIR Canada made the comments in its submission to the Canadian Securities Administrators’ proposed client-focused reforms.
FAIR says there are many problems that exist for ordinary Canadians who seek financial or investment advice or purchase investment products from advisors under the existing rules and industry practices.
“Many Canadians believe that dealers and their financial advisors are required to provide advice based on their client’s best interests which is a reasonable belief and expectation when receiving ‘advice’ but, in fact, most Registrants simply sell (or distribute) products under a suitability standard,” FAIR says in its submission.
A number of issues lead to confusion among investors
Many other issues, including confusing titles, also go against the best interest standard, it says.
It states that the CSA’s proposed amendments to enhance the client-registrant relationship will only “nudge” registrants in their conduct “but will not achieve the profound shift necessary to ensure Canadians receive the objective, professional financial advice that is needed and rightfully expected.”
A statutory best interest standard is needed, says FAIR, both as a prescriptive obligation towards clients and as a guiding principle in dealers’ conduct towards clients. “This would lead to transformation of the investment industry so that Canadians can achieve financial security.”