By Peter Boys
“The Financial Coach”
The subprime mortgage meltdown in 2008 impacted every aspect of the financial services industry and almost brought the world’s banking system to its knees. As a result, regulators in every country, including Canada, are mandating draconian new compliance requirements.
Take Great Britain. Previously, financial advisers selling regulated products could choose to earn their income by charging their clients a fee for service, or by commission from selling a company’s products. Since the changes introduced there at the end of 2012, financial advisers are no longer allowed to be paid commissions from financial services companies. They must set their own fees, based on the services they offer, and agreed to by the client before any services are provided. This is meant to ensure that the advice they give to their clients is unbiased.
The first effect was that nearly 25 per cent of financial advisors left the industry. It’s estimated that 80 per cent of the British public will lose access to professional financial advice. The other interesting thing is that, surveys in England and Canada have indicated that the majority of consumers don’t want to pay fees up front, but would rather they were built into their investment or insurance products.
There is ample evidence that average Canadians today have too much debt and not enough savings. Many spend more time planning their vacations than their finances. It’s evident that many Canadians are already not getting the professional advice they need. The net result of implementing the same commission restrictions here will be even more people going into retirement dependant on government support programs and ultimately higher taxes on all of us to support them.
I’ve been a commission-paid person most of my working life, and have always put my client’s interest ahead of my own, and I’ve been well compensated. I always made sure that I was educated on products and what they could do for my clients. I’ve also made sure that I had a full understanding of each client’s needs, then matched the product to those needs.
People tell me that I’ve been very lucky all my working life, to which I reply, that I work very hard at being lucky every day. I regularly attend seminars and conferences to increase my knowledge. I am a member of the Financial Advisors Association of Canada and the Independent Financial Brokers of Canada. I’m a charter member of Canadian Association of Farm Advisors and a qualifying member of the Million Dollar Round Table.
I do this so that I can have access to current financial, tax and product information, and to ensure that I adhere to their codes of conduct and ethics.
All the successful advisors I know want their clients to be properly advised and protected. If the regulators want consumer protection to be the real goal, they should start with measures to improve the professionalism of advisors. Consumers would benefit tremendously from a requirement that advisors meet proficiency standards and adhere to a code of professional and ethical standards that would ensure that client’s interests are always put first.
With this approach, consumers would be much better protected, not by taking away the freedom to choose how they pay their advisors for advice.
Offer your comments, or indicate how you would like to pay for your financial advice, by visiting www.boysfin.ca.
— Money Talk