Canada’s investment industry has no need to adopt a fiduciary duty standard of care, according to panelists speaking at the Association of Canadian Compliance Professionals (ACCP) Compliance Forum in Toronto on Monday, because the current best interest standard is sufficient and the current debate is only confusing market participants.

“We have had common law evolving with respect to what is a fiduciary obligation for years and in that evolution it has always been clear and consistent,” said Laura Paglia, partner, Torys LLP.

Currently, the Investment Industry Regulatory Organization of Canada (IIROC) already has a rule, said Paglia, which states that advisors have an obligation to know their clients and understand their personal and financial circumstances and to act in their best interest.

Moving from this established standard to a fiduciary duty is troublesome, she said, because it suggests that clients are vulnerable and completely dependent on advisors for advice, yet the fact is that people trust and rely on their advisors to different degrees and the legal analysis should reflect that.

In addition to changing the client-advisor relationship, the adoption of a fiduciary duty also has an implication on the kind of advice, or, more specifically, what products, advisors can offer clients.

In a Canadian Securities Administration (CSA) paper on fiduciary duty released in October, regulators raise the question as to suitability and products.

Fiduciary duty debate: Toward a new standard?

“The way it currently stands,” said Rob Brush, partner, Crawley Meredith Brush MacKewn LLP, “a recommendation could be suitable but not necessarily the best recommendation for a client or not necessarily in the client’s best interest.”

The paper’s ambiguity as to whether the issue is the cost or not, is part of the problem, according to Paglia. The paper states that a product can be suitable but not be the best product, said Paglia, but what does that mean? Does that mean that it should be the cheapest? That the fees need to be more transparent?

“Then say that as a regulator, and as the CSA, straight up on the table and make that the issue, the cost,” she said. “But let’s not hide it in a technical debate that even the industry must unravel like the layers of an onion because it’s not quite clear what it is that we’re trying to accomplish.”