The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) has published a wish list of investor protection initiatives it would like to see implemented in 2017.
At the top of the list is a request for a best interest standard. The investor rights group says that there is "a distinct expectations gap" between what is required of advisors and what is expected by consumers. "Consumers are led to believe that advisors make recommendations in their best interest, but no such standard is actually in place," says FAIR Canada. "Often, consumers are unaware that the financial services providers that they receive 'advice' from are simply salespeople pushing high-cost financial products. When things go awry, advisors’ defense is that the investments were “suitable”, which is a much lower standard."
Next on the wish list: regulators should ban all forms of third-party, embedded commissions, especially trailing commissions, and encourage price competition between mutual funds. "Trailing commissions carry serious potential for conflicts of interest and present high, opaque costs to consumers," says FAIR Canada. "Conflicts of interest are structural and systemic, harming not only investors but the market itself, as demonstrated by Professor Cumming’s research." As we reported earlier this week, the Canadian Securities Administrators are considering the idea.
FAIR Canada would also like the government to establish a single, statutory, national ombudservice with the power to make binding decisions. The organisation believes this is "vital to the integrity of the Canadian financial services market and the protection of Canadian consumers". This request follows a third-party review which raised concerns about the efficacy of the Ombudsman for Banking Services and Investments (OBSI) and argued that it lacks the authority to call itself a true ombudservice.
FAIR Canada's complete wish list is available on its web site.