The Investor Advisory Panel wants psychometrics to be adopted as best-practice for risk-profiling and criticises the CSA’s Client Focused Reforms proposal for falling short of adopting an overarching best-interest standard.
In its Annual Report the Panel says it recognises that investors gain some protection from the inclusion of best-interest principles in areas including know-your-client, know your product and suitability. But it says an overarching best interest standard is needed to fill the gaps that arise when a matter is not specifically dealt with by the proposed reforms.
The Panel’s call for psychometric testing to be made the gold-standard continues its long campaign to improve standards around risk-profiling. In 2015 PlanPlus assisted the Panel by preparing a report on the way risk-profiling was done in Canada, uncovering a lack of understanding of what makes a risk-profiling methodology valid. The report also found a lack of standard definitions and risk concepts.
The Panel was pleased to see the recently announced legislation to regulate and restrict the use of the terms financial planner and financial adviser, as it had previously identified that seniors were being misled by the lax usage of terms that implied specialist skills.
The Panel is continuing its long-running campaign for an end to embedded commissions and welcomes the proposed CSA amendments that will ban mutual fund deferred sales charges and payment of trailing commissions to order-execution-only dealers.
The Investor Advisory Panel works with the Ontario Securities Commission to identify areas of risk and concern for retail investors and represent the needs of investors in the formulation of regulation. The Panel is comprised of nine members appointed by the Chair of the Ontario Securities Commission following a public application process.