Financial advisors who telephone existing clients to discuss products and services will now be governed by the same rules as other service providers, according to a recent ruling from the Canadian Radio-television and Telecommunications Com-mission. But financial services industry groups say the change is an unnecessary intrusion that could hamper the ongoing communications that advisors have with their clients.

Under the new CRTC ruling, financial advisors will have to follow the same rules as all telemarketers. These include: contacting clients only between 9:30am and 9:00pm, local time; accepting National Do Not Call List requests; and identifying themselves during a call.

Previously, financial advisors and brokers had succeeded in winning exemption from the DNCL rules when they made unsolicited calls to existing clients. It was a different story for insurance advisors, who had also lobbied for the same exemption. In May 2009, the CRTC refused to exempt them.

While many financial services industry-watchers thought the CRTC would eventually extend the exemption to insurance advisors, the regulator surprised many by ruling in the opposite direction.

The current economic environment was a factor in extending the rule to financial advisors, says Andrea Rosen, senior telecommunications enforcement officer with the CRTC: “In putting our minds to the current market situation and after a few years [of having the] DNCL in place, we needed to level the playing field among all telemarketers. That means no one can call people at midnight, no one can use an automatic dialer and no one cannot identify themselves.”

But the CRTC decision creates some issues for advisors that regulators may not have anticipated. For instance, advisors servicing clients in Western Canada may find themselves in a catch-22 between their duties to clients and these new regulations, says Susan Copland, director of policy for the Investment Industry Association of Canada in Vancouver. While major markets open at 9:30 a.m. EST, clients in the western parts of Canada cannot be contacted until 9:30 a.m. PST (12:30 p.m. EST) under the rules.

Notes Copland: “Sometimes advisors need to call clients before markets open to discuss investment strategies. But with these new rules, it’s a problem for our members because they can’t provide existing services.”

While the CRTC ruling does acknowledge the need to call clients outside these hours in certain situations, it also states: “There is no obligation to do so exclusively by telephone.”

Text messaging or emailing a client to call in is an alternative, says Rosen: “We understand the marketplace. There’s plenty of opportunity to call within the time frames expected, as well as other ways to contact them on urgent matters.”

Some clients, however, do prefer to be called, adds Copland: “Calls by a broker are not a nuisance if it’s in a client’s best interest to know what’s going on in the market. It’s not like an advisor is calling to sell carpet cleaning.”

To address these concerns, the IIAC plans to take action soon, which could include working with the CRTC to find more ways that IIAC members can adapt to the ruling.

It’s also important to note that the first draft of a “do not email” bill is in the works, says Copland. Such legislation could escalate the problem of advisors being unable to reach out to existing clients when they need to. “Technically, the way it’s drafted,” Copland says, “it might hit existing clients as well. We aren’t sure.”

These rule changes should motivate advisors to discuss the issue of communication early on in their relationship with clients rather than waiting, says George Hartman, president and CEO of Toronto-based Market Logics Inc. : “I would rather see advisors establishing rules regarding contact early on in the relationship, and not waiting for regulations to settle.”

Advisors with Winnipeg-based Investors Group Inc. already do this, says Ron Arnst, director of media relations: “Because of our one-to-one client relationship business model, we have established agreements with clients regarding how and when we contact them. The ruling will have little impact on how we do business.”

One option available to advisors who want to avoid running afoul of the CRTC regulation is to include a “negative calling clause” in a client’s account statement, similar to negative option billing. Such a statement notifies clients that the advisor may call them outside of certain hours in various circumstances, unless a client states otherwise.

Advisors who wish to try this route, says Rosen, must first submit a formal query to the CRTC to find out if their proposal is
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