As Investment Executive celebrates its 25th anniversary, it’s a good time to reflect on the fundamental changes that have swept through the financial services sector over the past quarter-century.

The investment industry that we began covering in 1989 would be almost unrecognizable to an investor today. The banks were just starting to get a toehold in the brokerage business. The mutual fund industry was tiny. Stocks were still traded on the floor of the Toronto Stock Exchange.

Since then, the banks have grown into dominant players in the wealth-management business. Stock exchanges have consolidated and demutualized, faced competition from alternative trading systems and consolidated once again.

Regulators have struggled to keep up. There has been some progress – from the founding of the Mutual Fund Dealers Association of Canada to the formation of the Ombudsman for Banking Services and Investments and the regulatory reshuffling that produced the Investment Industry Regulatory Organization of Canada. But the rules themselves have not kept up with the revolution in the investing industry.

There have been changes – driven by a fundamental shift in demand and created by a combination of reduced pension coverage and declining interest rates, among other factors – that have made investors of us all. The industry’s market has expanded, and transformed, from being composed of engaged, knowledgeable investors into a much larger group of less sophisticated consumers.

Yet, regulation remains fixed upon the idea that disclosure provides adequate investor protection. But, for the better part of 20 years, it’s been clear that’s not the case. Most consumers don’t understand the financial information they receive. They are at a massive disadvantage when it comes to making sound investment decisions.

The industry has grown too large, the products too complicated and the stakes too high for regulators to remain rooted in the 1980s. It’s time for regulators to join the 21st century and require that clients’ best interests come first.

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