Given the level of unprecedented regulatory change in the investment industry during the past several years, financial advisors have relied on support from their firms to navigate through the new regulatory environment.
However, when advisors surveyed for this year’s Dealers’ Report Card were asked to rate their firm’s performance in “support for dealing with changes in the regulatory environment,” there was a drop in satisfaction overall for two key reasons: advisors find their dealers are too complacent with the regulators’ mandates; and there’s consensus that more support and information on key regulatory changes comes from outside sources rather than from advisors’ firms.
The most prominent of advisors’ gripes was what they perceive as their dealer’s complacency with whatever rules the Mutual Fund Dealers Association of Canada (MFDA) proposes and implements.
“[My firm] doesn’t question the regulator on the things that don’t make sense,” says an advisor in Ontario with Richmond Hill, Ont.-based Global Maxfin Investments Inc.
Instead of accepting regulation automatically, some advisors said they would like to see their dealers “stand up” to the MFDA on advisors’ behalf.
“You have a seat at the table, so why are you letting this happen? I want you to go to the table and be my advocate,” says an advisor in Ontario with Markham, Ont.-based Worldsource Wealth Management Inc.
“[My firm] does a poor job at standing up for advisors,” adds an advisor in Ontario with Windsor, Ont.-based Sterling Mutuals Inc. “[Management] has good intentions, but they tend to implement everything they’re told without any pushback.”
This isn’t entirely accurate, says Nelson Cheng, Sterling Mutuals’ president and CEO. Specifically, he says, dealers do try to present their case and reach a compromise with the MFDA. However, he adds, dealers should do a better job at making advisors aware of these efforts.
“We are actively involved in the industry bodies [in] providing input on [regulatory changes],” says Cheng, who sits on the Federation of Mutual Fund Dealers’ board of directors. “We also attend some of the regulatory meetings and provide our feedback there, too. I don’t think anyone is necessarily taking any [regulatory change] lying down, if that’s what some advisors are thinking.”
Advisors also were unhappy with the support, or lack thereof, that they receive from their firms. Some advisors find little to no support exists, or that their firms are too slow to react to regulatory changes. This means advisors have to turn to third parties that offer more useful support than what their dealer firms provide.
“We get a lot more information from the mutual fund companies than our head office, specifically with regard to CRM2 [the second phase of the client relationship model] and [the Canadian Securities Administrators’ recent proposals],” says an advisor in Ontario with Mississauga, Ont.-based Investment Planning Counsel Inc.
Adds a Global Maxfin advisor in Alberta: “I get better information from Fidelity [Canada Asset Management ULC], CI [Investments Inc.] or Investment Executive.”
However, in response to advisors’ grievances, dealer’s executives point to the sheer amount of regulatory change as a reason why a firm struggles to keep up. In fact, dealers have had to allocate more resources, money and manpower to ensure they make the changes necessary to be compliant with various rules being instituted.
“There have been so many demands that have been placed on the industry over the past few years,” says George Garner, head of national sales with Oakville, Ont.-based Manulife Securities. “The amount of time, energy and resources that had to be committed to making sure that our industry, and all organizations that operate within it, were delivering what they needed to deliver within the time frames we were given [has been enormous].”
Tania Czajkiwsky, chief compliance officer with Sterling Mutuals, agrees that regulators’ demands are taking their toll on dealers: “We understand what’s happening and we have to adapt. To be quite honest, there really is no option. It’s as simple as that.”
Despite the complaints from many advisors, some believe their firms offer more than adequate support for dealing with the changes taking place in this precarious regulatory environment. Specifically, some advisors pointed to their dealer’s ability to be proactive and to be effective communicators. Being kept up to date and ahead of the curve on changes is one of the key aspects that had advisors speaking positively about their firms.
“The head-office support staff is knowledgeable and up to date,” says an advisor in Atlantic Canada with Montreal-based Peak Financial Group. “There is lots of advance notice. The head of the company meets with regulatory officials to give his opinion. All in all, I feel well informed by my company.”
“[My firm] really communicates changes ahead of time,” adds an advisor in Atlantic Canada with Toronto-based Assante Wealth Management (Canada) Ltd. “It’s really proactive. I’ve been in the industry for 32 years and I’ve never had a complaint. [The firm] makes sure I’m compliant. [Our compliance department] is on top of everything.”
In fact, Assante started providing its advisors with information and support for CRM2 five years prior to its implementation through communication, training and educational videos, says Bob Dorrell, senior vice president, distribution sales and service.
“We’re very proactive [on] issues,” Dorrell says. “We build awareness with advisors and we do a good job in asking advisors what kind of support they’d be looking for from us, then building it.”
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