After the recent revelations about advisors feeling pressured to recommend less than ideal products due to sales targets, certain sections of the industry have digested the news in different ways. The CSA’s proposal for an increased fiduciary standard to better protect investors has been pushed further into the spotlight. Opinion in the industry is split, but were the recent revelations the shock the industry needed or will they cause irreparable damage?
“I’m glad that the news has come out,” says Jennifer Black, Private Wealth Manager and Portfolio Manager at DFS Private Wealth. “I don’t think investors have an understanding of what a truly independent advisor is. You can have someone who claims to be independent but they’re only referring to product not to the sales targets or mentality they bring to the table – many advisors are not open about that.”
Black references the story that surfaced earlier this year about one of Canada’s big banks firing a number of advisors who were not hitting a revenue threshold of $600,000 a year. She believes that advisors under that sort of sales pressure are simply incapable of only recommending products and services that are in the best for their clients. “It’s both ludicrous and unfortunate that that we need a best interest policy, but we do need it,” Black says. “When advisors are meeting with their clients there are so many other factors that come into consideration. They may have independence from a product selection perspective, but they’re compensated more for selling their internal proprietary products.”
Black also believes that investor education will help the industry become more consistent across the board. Informed people make better decisions, not only about their investments but also about who they employ as their advisor. “There are so many advisors who are good sales people, but how often are they meeting with their clients; how much do they know about their clients,” Black says. “It comes down to educating investors on what they should expect from a good advisor.”
Black is disappointed that the industry is in a position where regulators feel forced to introduce a best interest standard. “The best interest approach needs to be across the board, it’s not just doing things in the best interest of the client, it’s providing clients with the best of everything,” she says. “Advisors should be delivering that on a day to day basis. This industry is so far below the standard that it should be reaching.”