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Ad­vi­sors’ stand is clear on the “best in­ter­est” stan­dard.

Reg­u­la­tors take heed: fi­nan­cial ad­vi­sors sup­port a “best in­ter­est” stan­dard — and you should, too.

In a sup­ple­men­tary ques­tion added to this year’s Re­port Card se­ries, In­vest­ment Ex­ec­u­tive’s re­search jour­nal­ists asked ad­vi­sors from the four ma­jor re­tail dis­tri­bu­tion chan­nels — bro­ker­ages, mu­tual fund and full-ser­vice deal­ers, banks and in­surance agen­cies — whether they sup­port the in­tro­duc­tion of a best in­ter­est stan­dard for client/reg­is­trant re­la­tion­ships. Re­sound­ingly, and some­what sur­pris­ingly, the an­swer was yes.

In fact, about three-quar­ters of the ad­vi­sors sur­veyed in this year’s Re­port Card se­ries said they favour a reg­u­la­tory re­quire­ment to put clients’ in­ter­ests be­fore their own. This view is shared by ad­vi­sors in all four chan­nels, and it spans the coun­try as well.

This broad-based back­ing by ad­vi­sors for man­dated higher con­duct stands in stark con­trast to the loud re­sis­tance from the in­vest­ment in­dus­try’s firms and the trade groups that are paid to rep­re­sent their in­ter­ests.

Of course, man­age­ment and front-line ad­vi­sors ap­proach this mat­ter from dif­fer­ent per­spec­tives. Firms resist most reg­u­la­tory change, as they fear it can only add costs and pose an unwelcome risk to their busi­ness. In con­trast, ad­vi­sors — many of whom be­lieve they al­ready work in their clients’ best in­ter­ests — tend to fo­cus on the up­side that can come from rais­ing the reg­u­la­tory bar.

Ad­vi­sors who sup­port a best in­ter­est stan­dard are clear that they view this pro­posal as an op­por­tu­nity to en­hance the in­dus­try’s im­age, curb com­pe­ti­tion from un­eth­i­cal ri­vals and bring the reg­u­la­tory regime in closer align­ment with client ex­pec­ta­tions. Many ad­vi­sors say it’s the right thing to do.

Un­for­tu­nately, most reg­u­la­tors re­main in the thrall of in­dus­try man­age­ment and the de­sire to reg­u­late to the low­est com­mon de­nom­i­na­tor. So far, only On­tario and New Brunswick have pledged to sup­port a best in­ter­est stan­dard. Hope­fully, the re­cent in­sight into ad­vi­sors’ views on the is­sue will open some eyes at the reg­u­la­tors. In­dus­try man­age­ment might be afraid of tougher con­duct stan­dards, but now we know that ad­vi­sors are not. It’s time for reg­u­la­tors to find their courage.

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