Our investment advisers’ moral compasses are still being aligned

Ed Waitzer - Publications

Our investment advisers’ moral compasses are still being aligned


Opinion Contributed to The Globe and Mail / Published Monday, Aug 19, 2016

In 1994, the Ontario Securities Commission asked one of its commissioners to undertake a review of regulatory issues facing what was then a rapidly growing investment fund industry. Commissioner Glorianne Stromberg’s report, released in January, 1995, highlighted inherent conflicts of interest with respect to the structuring and management of investment funds and the distribution of securities generally – all resulting in the interests of consumers not being placed first. She also noted the inadequacy of the training and proficiency of many of those who sell and manage investment funds. Her proposals addressed these conflicts of interests and proficiency gaps.

More than 20 years later, the Canadian Securities Administrators is still studying these issues. Many in the industry continue to argue that it is the client’s responsibility to do their homework. Should caveat emptor apply when buyers think they are hiring a professional to help them do the shopping?

With the passage of time, the significance of the issues highlighted in Ms. Stromberg’s report now have systemic implications. For one, a strong financial-services sector depends on public trust. This has been seriously eroded and is unlikely to be restored (or a sound regulatory framework built) unless investors are entitled to expect that the financial professionals they rely upon are proficient and will be held accountable to a uniform best-interest standard. As importantly, the lack of workplace pension coverage for the majority of Canadian workers, coupled with the ongoing transfer of wealth from savers to the financial sector through high investment fees, have become challenges to the adequacy of retirement income savings. We continue to kick the can down the road.

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