The title “Financial Advisor” is thrown around rather loosely these days. The use of the title is widely permitted and may be utilized by anyone; including those who want to sell you stuff. The problem is most investors associate “Financial Advisor” with an individual who acts in their best interests. In practice, dealing with a salesperson when you think you have a professional “advisor” is the epitome of misrepresentation and a buyer-beware relationship.
The Small Investor Protection Association of Canada (SIPA) is advocating for a clear distinction between true fiduciary investment professionals and salespeople cloaked as financial advisors. The report goes into detail about the SIPA’s research. You can read the full report here.
Some of the SIPA study highlights I found of interest:
Ontario Securities Commission unleashed secret shoppers on the Canadian investment industry. They found the misrepresentation went much deeper as shoppers encountered 48 different business titles (investment representative, financial planner, and financial representative to name a few).
Of the 121,932 registered in the Canadian investment industry only 3% would be considered true fiduciaries. This means 97% of Canadian “advisors” are able to misrepresent and deceive the public.
Other industries, including legal & healthcare, have strict rules about misrepresentation and false duty of care. Imagine if your doctor or lawyer were able to fake credentials?
Financial salespeople can sell you anything deemed “suitable.” Suitable is like saying water is “drinkable” or food is “edible.”
Like the United States, the Canadian financial and insurance industry is spending millions of dollars to protect the status quo (mislead and take advantage of the investing public).
I applaud the SIPA of Canada for exposing an egregious gap in the investment industry. With all of the complexities of the upcoming Fiduciary Rule, distinguishing between salespeople and fiduciary investment professional is a no brainer.
The CFA Statement of Investor Rightsis a great tool to hold your current advisor accountable and better understand potential conflicts of interest, compensation, and investment approach.