Industry veteran warns against banning commissionsBy Alain Thériault | January 10 2017 01:30PM
On the verge of retirement, Don Reed says he approves of regulatory efforts to create transparency but warns against following Britain's example and prohibiting commissions.
About to bow out as CEO of Franklin Templeton Investments, Don Reed notes that his 45 years in the industry and 27 years at Templeton have been particularly marked by regulatory changes.
What stands out for Reed? That transparency benefits the entire industry. "We’ve seen regulation increase quite a bit, especially in the compliance field. When I came to Templeton in 1989, we didn’t have a person for compliance. Now we have four dealing with the regulatory environment across Canada and four dealing with portfolio investments."
He commends Canadian regulators on the work they have done in increasing transparency, but he is not sanguine about the British decision to ban commissions.
"A negative outcome"
"We see the increasing regulatory environment as a good thing for investors and our industry, since it enhances disclosure. CRM2 is a good example of it," comments Reed. "I think our regulators are doing a great job in that sense. I don’t know what will be the outcome of the embedded commissions consultation in Canada, but I think the commissions ban in the UK has had a negative outcome."
He points out that its was small investors in Britain who were the most affected because the ban prompted many advisors to leave the industry. "The issue is that if we have fewer advisors and they are focusing on the bigger investors, smaller investors will have to rely on their own resources, without the support of an advisor," he says.
"More than $46 billion in AUM"
Looking back, Reed also highlights the phenomenal growth Templeton has experienced since 1989, when he was recruited by his mentor Sir John Templeton. Templeton, who passed away ten years ago, founded the the firm which later became Franklin Templeton. "We were 70 people then and there are now 550 working in Canada in our Toronto head office and in our offices in Calgary, Montreal, and other locations across Canada. We had $1.5 billion of AUM [assets under management] back then and now have more than $46 billion in AUM."
Reed will retire on January 31st, at which time he will transition out of his director and chair roles for the company entity boards on which he serves, but will remain director and non-executive chair for the Templeton Growth Fund, Ltd. and Franklin Templeton Corporate Class Ltd. fund boards after January 31, 2017. Duane Green will succeed him as CEO when he retires. As Managing Director, Green had already begun to assume some responsibilities as part of the transition, among other things directing Canadian distribution operations since October 2015.