Advocis surveys consumers on advisor compensationBy Susan Yellin | February 24 2015 09:00AM
Advocis is asking its 11,000 members to survey their clients primarily to determine what consumers think about the way their financial advisors are currently paid.“We have heard that a lot of consumers are allegedly concerned about the way financial advisors are compensated,” said Greg Pollock, president and CEO of Advocis. “That’s certainly not what we are hearing from our financial advisors – their clients seem quite happy in fact. So we are surveying their clients to find out where this is coming from and indeed what consumers think.”
While wide ranging in scope, of particular interest in the survey is the suggestion by the Canadian Securities Administrators (CSA) to ban or cap trailer commissions, a move Advocis says will restrict consumer choice and reduce access to advice.
“We have to counter the claims by groups such as FAIR Canada who argue that removing embedded fees is in the best interest of the consumer. It is not,” states the email to advisors asking them to get their clients involved by completing the survey.
Pollock said the survey will also help Advocis look at trends in the insurance industry and asks consumers questions such as the kinds of financial products they currently have along with their comfort level with buying products on their own versus talking to an advisor.
About a third of the questions ask about advisor compensation: how clients currently pay for that advice, whether they think there is a conflict between some forms of payment and the client’s needs and whether the country should proceed with the CSA suggestion.
Pollock said the Advocis stance has always been the need to continue offering consumers a choice in how to pay for financial advice – whether it be embedded fees, a percentage of assets or other models.
“Our sense is that the CSA is trying to eliminate some of that choice for consumers,” said Pollock. “We think that that is short-sighted in terms of overall good public policy. We are certainly collecting data to back up that view. “
He said Advocis is fully supportive of CRM2, which affects the mutual fund industry, because it provides disclosure and transparency to the way mutual fund advisors are paid. While he – and many in the mutual fund industry – believe that CRM2 is a done deal, Pollock said the same cannot be said for the embedded fees issue.
“I think the CSA has been quite clear that they are conducting research to address the whole issue of whether or not advice is conflicted with the provision of this kind of compensation model. We have yet to hear from the CSA on that.”
Pollock said the survey information is being collected and analysed by a third party with the final results expected in a few months.
He said what he really hopes will come from the survey is a clear indication as to what consumers feel about embedded commissions and the satisfaction level they have had up until now with their financial advisors. But he does acknowledge there may be some responses that he may not be anticipating.
“There hasn’t been significant pushback – or even [any] pushback – in terms of fees that their clients are paying. But that’s certainly not what we hear in the press and we’re trying to determine where is this disconnect between what we are hearing in the press and what we are hearing from our advisors and their clients,” said Pollock. “So yes, there may be some unforeseen information in those results … and if so, we are going to have to figure out how to address that.”