As the client-advisor relationship comes under scrutiny among regulators around the world, advisors are set to face higher disclosure standards, regulatory authorities said on Thursday.

Speaking at the Investment Industry Association of Canada’s annual conference in Toronto, Susan Wolburgh Jenah, president and CEO of the Investment Industry Regulatory Organization of Canada said the client-advisor relationship has become a key area of focus for regulators around the world, particularly in the wake of recent investment industry scandals.

She noted that a debate around imposing a broad fiduciary standard against all providers of financial advice has emerged in several countries. Proposals to implement such a standard have been made in the United States and Australia.

“It’s premature to predict whether these proposals will be implemented, or when,” she said. “To date, the public debate has really focused on a very high level discussion, and general endorsement, of a harmonized standard.”

While Wolbugh Jenah said this is a compelling principle, she warned that it would require major changes in regulatory oversight and industry business practices.

Regulatory proposals in Canada are more specific than the concept of introducing a high level fiduciary standard, she noted. The Canadian proposals relate to more transparency and better disclosure on services and fees when clients are opening accounts, and in terms of conflicts of interest.

While these proposals do not directly address the concept of a fiduciary standard, the changes would elevate the client standard of care, Wolburgh Jenah said.

Other areas of focus for regulators include compensation practices and the training and proficiency of advisors.

In terms of compensation, Wolburgh Jenah noted that some jurisdictions, including Australia, have proposed banning a slew of compensation practices, such as sales target achievement awards and up-front commissions.

She said Canadian regulatory proposals do not involve prohibiting any current compensation practices in Canada, but call for enhanced transparency and disclosure to clients.

“We recognize that greater transparency may lead to changes in business practices and compensation arrangements,” she said.

In terms of proficiency standards, Wolburgh Jenah said IIROC was working with stakeholders and industry committees to ensure the standards in Canada remained relevant and up to date.

“We believe it is important to review our proficiency standards, including experience and competency, in order ensure that they properly reflect current marketplace realities and investor needs,” she said.

IIROC has heard calls for higher standards of proficiency and professionalism in the wealth management industry, from both investors and industry participants in Canada, she noted.

Improving disclosure and transparency are also priorities for regulatory reform in the United States, said Daniel Sibears, executive vice-president of FINRA.

The heightened regulatory focus on the client-advisor relationship comes as the nature of advice shifts toward more comprehensive financial planning instead of individual transaction-based advice, Wolburgh Jenah noted.

“There appears to be a shift away from a transactional focus to a more advice-based relationship.”

IE