Advisors praise their compliance departments

Investment Executive’s 2023 Advisors’ Report Card found that advisors across the brokerage, dealer and retail bank channels continue to appreciate the value their compliance departments bring.

“Having the ability to call someone [in compliance] is important, especially with all the regulatory changes coming down the pipe from [the self-regulator],” said a brokerage advisor in Ontario. While being “on a first-name basis with compliance and legal [is] probably not a good thing,” they joked, “[compliance is] my partner.”

Reliable compliance support can even improve advisors’ relationships with clients, said a dealer advisor in Quebec. “It’s great on our end. It’s very important,” they said. “Our customers talk about it; they feel reassured.”

And as a dealer advisor in Atlantic Canada said, when you’re in a “difficult” regulatory environment, it’s nice to see compliance divisions doing a “good job in keeping up.”

Average ratings for the “compliance relationship & support” category in the 2023 Advisors’ Report Card series were relatively unchanged from 2022. The performance average for the category was 8.6, keeping it among the 10 highest-rated in 2023, while the importance average was 9.1. Those results compared with 8.7 and 9.2, respectively, for the “advisor’s relationship with compliance department” category used in 2022 (last year’s ratings were adjusted to remove insurance advisors for comparison purposes).

Of the three channels, the brokerage channel rated compliance support the highest at 8.9 (down from 9.1 a year ago). Brokerage advisors gave the category an importance rating of 9.1, similar to 9.2 in 2022.

Many brokerage advisors said they had easy access to their compliance departments, with regular communication. The relationship was regarded as generally friendly, with compliance experts seen as allies rather than as “the business-interruption police,” said a brokerage advisor in Ontario.

Even where investment firms showed room for improvement, compliance departments were described as comprising “good people.” What’s sometimes difficult, a brokerage advisor in Quebec said, is the “industry-wide problem [that] the burden on advisors has been growing rapidly. [There’s] constant change. It’s hard to keep up.”

The same advisor suggested firms must streamline processes for better efficiency because some reforms “are not client-friendly enough” and some rules are “convoluted.”

Said a brokerage advisor in British Columbia: “Compliance is hard. It’s a tough job.” But, the advisor added, “It’s the most level-headed and logical department I’ve worked with. They’re tough, but if there’s an issue, you can discuss it.”

Advisors in the retail bank channel gave the compliance relationship category a performance rating of 8.3, up from 8.0 a year ago but still the lowest among the three channels. The category’s importance rating was 9.1, up from 9.0 a year ago.

Nonetheless, sentiment was generally positive. Bank advisors appreciated the protection and structure that compliance departments provided.

“[They] keep us safe, they teach us, they send us emails, they audit us. They are always doing all of that so we are in line, and if they see an issue, they help us fix it,” said a retail bank advisor in the Prairies. “With the new [know-your-client] rules, we had meetings about it [and] were helped all the way.”

Still, restrictions have been daunting, revealing a need for more flexibility and support. “Sometimes they’re too good at their job,” said one retail bank advisor in Ontario. Another Ontario bank advisor said, “I’ve gone through a few audits in the past few years. [That process] should be more collaborative [and] shouldn’t be so black-and-white. More talking should happen.”

Advisors working in the dealer space also noted challenges facing their compliance departments. They rated this category 8.6 for performance, down from 9.0 in 2022. They, like the other channels, rated importance at 9.1, down from 9.3 in 2022.

The compliance department “is protecting you from issues,” but the industry is “over-regulated,” said one dealer advisor in the Prairies. “To catch 1% of bad actors, 99% of [advisors] suffer unnecessarily. Regulations weed out incompetence more than malicious behaviour.”

Advisors also frequently noted the merging of self-regulators to create the Canadian Investment Regulatory Organization. One dealer advisor in Alberta referred to the process as “a disaster,” anticipating more red tape and confusion.

Other dealer advisors cited a lack of clarity regarding regulations: “I would like it if rules were black-and-white. I don’t like that they leave the rules up to interpretation, and I think it’s an industry problem,” said a dealer advisor in Ontario.

In this environment, dealer advisors valued knowledgeable compliance experts. One advisor in Ontario concluded: “We have always seen [the compliance department] as our friends. It’s always a push/pull relationship because our objectives are very opposite, [but] we do understand the importance and the role they play.”