A report commissioned by Advocis and conducted by PricewaterhouseCoopers says that regulatory changes could drive Canadian financial advisors out of the business and out of the mass-market segment.

The authors of Sound Advice: Insights into Canada’s Financial Advice Industry suggest that the increased costs and duties associated with new transparency regulations such as the Client Relationship Model Phase 2 (CRM2), and Point of Sale (POS) requirements could have a profound impact on financial advisors.

"For example, some reports have indicated that financial advisors have moved away from providing affordable and accessible comprehensive financial advice, leaving mass market and lower income consumers with access only to ‘do-it-yourself’ or modular advice," reads the document.

The Advocis report notes that, following retail distribution reforms in the UK which banned advisor commissions and introduced new clarity of advice and educational requirements, nearly 25% of financial advisors left the industry while those who remained needed to target wealthier clients in order to maintain viable businesses. In Australia, the authors point out that similar regulatory reforms generated compliance costs totalling $700 million AUD, driving up business expenses by more than 30%, likewise forcing advisors to re-focus their attention on high net worth clients.

"Given that the vast majority of Canadian households fall into the mass-market segment (i.e., households with less than $100,000 in investible assets,) proposed reforms could result in reduced access and a reported lack of consumer willingness to pay an appropriate fee for financial advice," say the authors.