Letters to the editor

Re: The financial services industry can’t have things both ways, Editorial (IE, May, 2010)

Your editorial accuses the Canadian securities industry of foot-dragging on regulatory reform [such as] “restricting commission arrangements or imposing fiduciary duty on advisors,” by arguing that disclosure is sufficient for investor protection, yet at the same time resisting efforts to improve disclosure. These accusations fly in the face of recent constructive initiatives and are a disservice to the Canadian regulatory community.

The near-final version of the Investment Industry Regulatory Organization of Canada’s client relationship model rule mandates extensive disclosure of the investment process, tougher suitability standards, and the disclosure of fees and commissions. The securities industry has had considerable input in this rule-making effort and supports the rule. The transparency of fees and commissions empowers the clients of Investment Industry Association of Canada member firms to determine whether to execute the transaction or go elsewhere in the marketplace. This disclosure, in effect, imposes a market discipline on the pricing of products and services, and commissions charges.

The securities industry provided significant input into the proposed IIROC rule imposing an obligation on members to obtain a fair price for OTC securities, define policies and procedures for meeting this obligation, and disclose the yield, including a statement of dealer remuneration, to the client. The industry also has an obligation for obtaining the best price on listed equity securities.

The securities industry has participated in the Canadian Securities Administrators registration reform project. National Instrument 31-103, now effective, requires investment advisors to manage conflicts of interest and determine how to respond, including by disclosing such conflicts. This rule, together with the obligation to deal honestly, fairly and in good faith with their clients, and tougher “know-your-client” and suitability obligations, moves the registered investment advisor close to a fiduciary standard.

Your comments discredit the efforts of the regulators to improve the calibre of investor protection, well before the financial crisis; fail to recognize the contribution of the industry to reform; and unfairly condemn the integrity of Canadian markets.

Ian Russell
President and CEO
Investment Industry Association of Canada
Toronto
@page_break@Re: Creditors pursuing listing life settlement companies by Gavin Adamson (IE, May 2010)

The reason as to why the life and health insurance industry dislikes this business is simplified to the point of being misleading.

The reason that the life insurance industry opposes the viatical and life settlements business in Canada is because such business is fraught with questionable practices and makes the person selling the life insurance policy, as well as investors, vulnerable to fraud. Markets for viatical and life settlements have been active in the U.S. for several years and have resulted in widespread fraud and abuse. Another problem area underlined by the U.S. experience involves privacy and the aggressive tracking by the viatical and life settlements industry of the health status of the insured individuals. It is also important to note that policyholders in Canada will often already have access to their life insurance benefits while alive through advanced death benefits.

Frank Zinatelli,
Vice President, Legal Services and Associate General Counsel
Canadian Life & Health Insurance Association
Toronto


Re: Banks should play role in financial literacy by Megan Harman (InvestmentExecutive.com, May 2, 2010)

The banks have graciously offered to help teach “financial literacy” in schools. After multiple generations of neglect, now they want to help. While we are at it, let’s get Al Capone to teach the firearms course.

The “four financial pillars” are all but gone. Three — banks, trusts and brokerages — are now owned and controlled by the banks. Originally, bankers pulled away from the Financial Planning Standards Council and the certified financial planner designation because their staff did not need to know about life insurance and the rest of that superfluous stuff.

The Institute of Canadian Bankerscreated its own quasi-alternative personal financial planner, without the extra confusing details. Now they want to sell insurance in the branches. There goes pillar number four, and along with it, the public’s option for independent advice.

For a long time, their idea of holistic, long-term financial planning was five-year guaranteed investment certificates and creditor insurance on your borrowing. Do we see a control/credibility issue here?

I agree, the general populace needs better information when it comes to financial matters and maybe schools would be a good place to start. Let’s set the bar higher than clerks, fund floggers and insurance salespeople. Any educating should be done by someone in the trenches with a professional planning designation and practical experience and not by bankers or academic theorists.

If we let the banks teach in the schools, will the program be focused on balanced, holistic advice or, as the track record suggests, will it be focused on generating better bottom line profits in the years ahead?

Richard A. (Rich) Hobson
Certified Financial Planner
Prince George, B.C.