A new poll by the country's largest advocacy group for people over age 50 suggests that older Canadians want provincial governments to better protect their life savings.
CARP conducted an online survey of 1,900 members last month and Go Public has obtained an advance copy of the poll's results. Amongst the key findings:
- 89 per cent of CARP members support a best interest standard (requiring that the interests of financial consumers be put at the forefront of all investment decisions).
- 79 per cent support the elimination of embedded fees in financial products.
- 89 per cent want the titles used by people selling financial investments to be regulated.
"Our financial system is not protecting investors," says Wanda Morris, CARP's vice-president of advocacy. "It's time for governments to stop discussing, debating and delaying, and start taking concrete action."
Calls for 'best interest standard'
The poll comes on the heels of a Go Public investigation earlier this week, revealing how lax laws in Canada mean that the majority of people providing advice in the financial industry are not required to act in a client's best interest, they only have to recommend products that are suitable.
For instance, a customer who says they want to invest in a mutual fund with medium risk might be sold something suitable, but with no mention that it pays the highest commission.
'I think what we have is a situation where investors' interests are not coming first.'- Wanda Morris, CARP
Go Public has received over 2,000 emails from past and present employees of Canada's big banks — TD, RBC, BMO, CIBC and Scotiabank — many of whom admit they often don't put clients' interests first, because they are pressured to push products on customers, such as poor investments with high fees, in order to hit their sales targets.
In response, the banks have said that customers always come first, and that unethical behaviour is not condoned.
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CARP's poll found that 89 per cent of respondents support introducing a statutory best interest standard in Canada, including 53 per cent who are in strong support.
"We've seen study after study on a best interest standard," says Morris. "I think what we have is a situation where investors' interests are not coming first."
'I just put my faith in them'
Dennis Holowaychuk wonders if a best interest standard might have protected him from financial loss after he sought advice from an investment firm in 1998 to help grow a $200,000 nest egg.
The 63-year-old health and safety adviser in Alberta's oil and gas sector is on the road a lot, so he thought paying to have his money managed would be the way to go.
"They assured me they were going to look after my best interests," says Holowaychuk. "I just put my faith in them."
The firm charged him a management fee to invest his savings in mutual funds — which had their own, additional management fees.
But over 18 years, between 1998 and 2016, not only did his savings not grow, they declined — to $190,000 — at which point he pulled his money out and invested it in safe but low-interest treasury bills.
"My money isn't growing," says Holowaychuk, "but at least it's not just helping the guys who give financial advice make money."
B.C. fights 'best interest standard'
In the past four years, the Canadian Securities Administrators — the umbrella group for provincial regulators — has conducted two national studies on best interest standards with its members as well as an industry roundtable.
'Best interest standard will be misleading for clients.' - B.C. Securities Commission
The Ontario Securities Commission supports introducing a best interest standard, but one of the most outspoken critics is the B.C. Securities Commission, which says such a standard "will be misleading for clients" in part because "the proposed standard is vague, which will make it difficult to enforce."
The U.K. and Australia implemented a best interest standard in 2013, and the EU will bring one in next January.
Go Public requested an interview with B.C. Finance Minister Mike de Jong to ask whether he supported a best interest standard, but was told he was campaigning in a provincial election and unavailable for comment.
Elimination of embedded fees
Of those who responded to the CARP poll, 79 per cent support the elimination of embedded fees in financial products such as mutual funds and GICs.
"When we polled our members, almost half of them [44 per cent] said they weren't aware that there could be a fee embedded in financial products that they own," says Morris.
Canada has the highest mutual fund fees in the developed world.
Research has found that mutual funds that pay the highest commissions are commonly recommended, despite studies that indicate they also perform most poorly.
Some industry lobby groups have argued against the removal of embedded fees, citing significant job losses such as occurred in the U.K. when embedded fees were eliminated. The number of people giving financial advice dropped from 40,000 to 31,000.
What's in a name
The CARP poll also showed that 89 per cent of respondents agree that regulating the titles for people selling investments would lead to more informed financial decisions.
As reported by Go Public, employees in the financial industry use dozens of titles — ranging from financial services representative to vice-president — but the vast majority are licensed as salespeople and have no fiduciary duty to clients.
"We think there should be far fewer titles," says Morris. "And that titles should clearly indicate when somebody is a salesperson or when they are providing financial advice."
CARP campaign to protect investors
The national advocacy group for older Canadians has launched a campaign, calling on government to make changes in the investment industry to protect people's savings.
"If we don't want to be absorbing huge social costs through government income-support programs, we need to be taking action to make sure that people's investments do better," says Morris.
With files from James Roberts
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