An increase in client complaints during the recent recession has undoubtedly led compliance departments to put more pressure on advisors. So, although some readers might expect a backlash against compliance in general, advisors surveyed for this year’s Dealers’ Report Card say their beef with compliance is cast outwardly toward the self-regulatory organizations, not toward the compliance officers within their firms.
Every time a regulator receives a complaint from the public, it’s required to investigate the allegation. This then places pressure on compliance officers at dealer firms to look into how advisors are filling out their paperwork. And with investment suitability complaints increasing by 15.2% over the 12-month period ended June 30, 2009, according to figures from the Toronto-based Mutual Fund Dealers Association of Canada, it’s no surprise advisors were feeling more closely watched when filing their compliance documentation in the past year.
Still, advisors maintain the problem is with the regulators, not with their firms. As one advisor in Quebec with Montreal-based Peak Financial Group points out: “There is an occasional tension because compliance is bound by MFDA regulations, and that slows down advisors. But, our compliance department is very willing to listen to us.”
“They are really good,” says an advisor in Atlantic Canada with Quebec City-based Desjardins Financial Security Investments Inc. of his firm’s compliance department. “[But] the MFDA has gotten to the point of ridiculousness. I spend half of my day filling out forms.”
Some advisors do not mind the extra surveillance from their firms’ compliance departments resulting from increased complaints, as they understand compliance officers are there to help, not hinder their businesses. “Things have changed in the past five years,” says an advisor in British Columbia with Toronto-based Assante Wealth Management (Canada) Ltd. “Compliance is here to support us, while making sure we are protected in the event of a client complaint.”
For the most part, advisors at other dealers shared those sentiments. With an average overall rating of 8.4, the “advisor’s relationship with compliance department” remained among the highest-rated categories — although the rating fell slightly from last year’s 8.7 rating.
Among the firms rated highly in compliance by advisors were Mississauga, Ont.-based PFSL Investments Canada Ltd. (9.5), Winnipeg-based Investors Group Inc. (9.1), and Calgary-based Portfolio Strategies Corp. (8.8).
A proactive approach to compliance is what impressed advi-sors at PFSL — a firm that has rated highly in the category for several years. “They are right there on top of everything,” says a PFSL advisor in Ontario of the firm’s compliance officers. “[PFSL] is always doing training on compliance.”
Using a virtual office system, in which advisors upload scanned images of their paperwork, PFSL’s compliance department can anticipate issues with compliance before they get brought up in a regulatory audit, says Jeff Dumanski, PFSL’s president and chief marketing officer. The system is designed so that head office, not advisors, stomachs the brunt of the compliance paperwork, he points out: “Our approach is to simplify processes across the dealership.”
Collaboration is what’s keeping advisors happy with compliance at Investors Group. Whenever compliance concerns arise, says Kevin Regan, the firm’s executive vice president of financial services, officers work with advisors to help them understand what went wrong: “We work with advisors to make sure clients are properly served and the advisors understand the issue, to ensure it doesn’t happen again.”
An Investors Group advisor in Alberta made note of that consultation process: “[The compliance department is] very diligent in ensuring we are compliant in our practices.”
Portfolio Strategies strengthens its advisors’ understanding of compliance by breaking down regulatory lingo and explaining it clearly, some advisors explain. Says a Portfolio Strategies advisor in British Columbia: “[Compliance personnel are] very helpful, informative and clear. Its first priority is to speak compliance in plain English, and that really helps.”
@page_break@Meanwhile, advisors with several other dealers continue to be frustrated with the demands regulators and their firms’ compliance departments have thrust upon them. An advisor in Alberta with Burlington, Ont.-based Manulife Securities recalls a time when his pen ran out of ink and he had to fill out a form in two different colours. Compliance asked him to redo it. “It’s becoming silly,” he says. “They seem to be making rules for the sake of making rules and creating extra paper expenses. They only end up making trouble for the good guys, and they are killing the business.”
But the burden of paperwork is unavoidable if a firm wants to be up to snuff with MFDA standards, says Bruce Day, president of Richmond Hill, Ont.-based Global Maxfin Investments Inc. “When you implement compliance changes, it’s going to be very disruptive to advisors because they are going to have to fill out forms and do things they never had to do before.”
This past autumn, Global Maxfin inherited a slew of compliance problems when it acquired Professional Investment Services (Canada) Inc. As outlined in an MFDA enforcement notice issued earlier this year, PIS was charged with failing to maintain a proper branch review program as well as failing to ensure that certain know-your-client information was properly recorded in client files and in the back-office system.
To deal with these issues, Day and his head office team have mandated that all advisors at the newly merged firm fill out a number of forms they have never filled out before. The resistance couldn’t be greater, and the dissatisfaction is revealed in the firm’s rating in the compliance category, which fell to a survey low of 7.1 from the highly respectable 8.9 PIS received last year. As one Global Maxfin advisor in Manitoba, who joined the firm from PIS, puts it: “They are putting in and demanding things that are way over the top. I have talked with [advisors at other] dealers, and their compliance does not demand the same things.”
Although Global Maxfin’s management has been holding conference calls and collaborating with branch managers to ease the process, there isn’t much more they can do beyond that, says Day: “We can’t stop and have cross-country training sessions every time the MFDA issues a new bulletin. It’s a part of the advisor’s responsibility to be up to date on the MFDA’s requirements.”
IE