Not on study says, ban

As authorities continue to examine whether earnings fees must be unbundled from investment goods, a new report indicates the move could have serious consequences for Canadians’ access to financial advice and raise issues of investment decision, industry concentration and cost transparency for customers seeking financial advice.

The report, And examines the choice of banning public-interest issues, sales commissions for the wider and financial advisors.

The debate on commissions that are embedded has been long-lived one of the investment market of Canada. Among the prices is that the trailer fee. This fee is a portion of a fund’s management expense ratio (MER) and has been the subject of much controversy for the last two decades. These commissions are paid out to investment consultants for the duration of time an investor holds a finance and based on the sort of investment finance, can vary from 0.5 percent up to 1.5 percent. (Both the investment company and its advisor who sold the fund share in these commissions.)

According to Mr. Rousseau, the ban on these commissions could create lots of public policy problems. It would make an advice gap to households, due in Canada. It will cause a reduction of choice for Canadians who have tastes and needs. The report claims that smaller and product manufacturers and vendors would be pumped out, developing a market concentration in a reduction in pricing transparency for customers, in addition to the hands of the larger players.

“If the objective is to produce financial advice widely available, then it’s crucial that policy-makers seriously consider all of the consequences of a ban on embedded commissions,” Mr. Rousseau states in the report. “A ban on embedded sales commissions would mean less choice in the marketplace for a service which must be aggressive and innovative to serve the broad spectrum of customers’ circumstances, risk appetites and needs.”

The Canadian Securities Administrators published a paper seeking industry comment on this issue of quitting commissions that were embedded. Consultation on the choice of Discontinuing Embedded Commissions, the newspaper requested the investment community on which the effects of a ban could have on investors.

The CSA as of June 9 received over 140 submissions, also include responses from many different professionals and industry groups such as financial advisors, advocacy groups, investment companies, robo-advisers and asset managers. The CSA is currently reviewing the submissions and will conduct a roundtable discussion on Sept. 18 to analyze the possible impacts of quitting additional commissions in Canada.

Mr. Rousseau and the School of Public Policy strongly supports the current policy efforts by the provincial authorities to require increased proficiency standards for financial advisors which will help enhance both the quality and the consistency of financial information throughout Canada.

“While it might not be a part of the CSA’s responsibilities to implement policies aiming at increasing access to financial information, it surely is the task of policy-makers to do so,” Mr. Rousseau states. “We need policies which both raise financial literacy, and ensure and enhance wide access to financial information. Policy makers shouldn’t lose sight of the need to ensure access to a market for the supply of products for all Canadians. This is a essential condition for the long-term amount of savings and for the retirement readiness of Canadian families”

Also on the Planet and Mail

The pressure is on for advisors (The Globe and Mail)

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