YOUR PRACTICE-Canadian regulators put off fiduciary duty standard

Wed Dec 18, 2013 1:49pm EST
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* Regulators say more work needed before decision

* Industry, mutual fund companies oppose higher standard

* Investor advocates want change to end conflicts of interest

By Andrea Hopkins

TORONTO, Dec 18 (Reuters) - Canada's investment industry is gearing up for a final battle to kill a proposed regulation that would formally require advisers to act in the best interest of clients, a change that could eat into the profit of wealth professionals.

According to polls, most Canadian investors do not realize that advisers have no "fiduciary duty" to their clients. Instead of looking after the best interests of the investors they serve, advisers currently need only meet a "suitability standard," providing advice or selling products that conform with the investor's needs.

That's critical because advisers are now allowed recommend or sell an investment product that pays them higher commissions than comparable products as long as the product being sold is suits the client's needs. A "best interests" standard might compel them to recommend the product with the lower fee, all things being equal.

Facing a threat to their long-standing income model, most wealth professionals oppose the proposal, saying the industry is already heavily regulated.

The Canadian Securities Administrators, gave the advisers a bit of breathing room on Tuesday saying more work needed to be done before a decision is made. The regulator has been weighing the pros and cons since October 2012.   Continued...