An industry association is calling on its members to help stall regulation that would threaten to remove choice in how advisors are paid; but, at the same time, the association is in favor of disclosing the insurance industry’s fees.
Advocis recently launched its “Financial Advice for All” campaign on its website, stressing that the banning of embedded commissions would put customers “at risk of losing access to affordable, quality financial advice.” The campaign comes after the release of a Canadian Securities Administrators (CSA) consultation paper that called for – among many other recommendations – the banning of embedded commissions in mutual funds.
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In a video detailing the campaign, Advocis president and CEO Greg Pollock advised the association’s 12,000 members to get their clients involved in the issue by having them contact their respective provincial legislators.
“It’s their voice in the conversation that will stop this direction in its tracks,” Pollock said in the video. “It will give them an opportunity to directly connect with their MLAs and their MPPs to tell their stories, to tell their story of how important it is that you continue to provide the kind of advice – the kind of access to advice – that you’re providing today.”
Pollock told The Insurance and Investment Journal that not enough advisors and consumers are aware of the CSA’s “ill-conceived proposal.” He also noted that should the proposal pass, it could lead to two-tiered financial advice.
“[The campaign] is going to be stepped up two, three or possibly four times or more than what you have seen us saying over the past two or three years,” Pollock said in an interview. “We have been taking a modest approach trying to have a constructive dialogue to convince people that the position we have taken on these issues is one that should be considered. We get the sense that there are a lot of people not hearing us – in many cases this is the CSA – and continuing to push in the direction they believe they should be pushing in and I find that problematic.”
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The CSA argues that conflicts of interest can “misalign” the interests of investors with those of investment fund managers, dealers and advisors. Thus, there is a need for a new compensation model that better aligns their interests, the regulators insist.
The regulators have turned down suggestions by the industry to wait and see the results of the Client Relationship Model – Phase 2 (CRM2) amendments, which encourages transparency and disclosure first. The CSA claims that ending embedded commissions complements the goals of CRM2.
While the CSA paper makes no reference to the insurance industry’s segregated funds, Pollock said that Advocis is in favor of disclosing fees. He also explained that the Canadian Life and Health Insurance Association (CLHIA) is exploring the potential of disclosing all fees in the MER.
