Investors should be allowed to choose how they compensate their financial advisors – whether by paying fees for their services or through fees that are embedded in the sales of financial products – several speakers said at the Advocis Regulatory Affairs Symposium held at the end of October.Countries such as the United Kingdom and Australia have recently banned most forms of embedded compensation, and the Canadian Securities Administrators has launched a review of advisors’ compensation in Canada that could result in a similar ban of embedded commissions on securities products. Currently Canadian advisors’ most common form of compensation, commissions are considered by this model’s critics to be a conflict of interest for financial professionals.

Some speakers at the Toronto symposium noted that the reforms that have taken place elsewhere are inappropriate in Canada because we have not seen the same kind of abuses here.

“We don’t have the same problems they had,” said Ed Skwarek, Advocis’s Toronto-based vice president of regulatory and public affairs.

Choice of compensation should be left to investors, said Robert McCullagh, past chair of Advocis and an independent broker with Benefit Planners Inc. in Calgary. “Why don’t we let the consumer choose the form of compensation he feels most comfortable with? Why would we take the choice away from him?”

Early results of a survey being conducted by Invesco Canada show that 80% of investors want to have a choice between embedded and fee-based compensation. And 88% of those surveyed want to know the cost of the advice they receive in dollar terms.

Financial advisors need to inform clients about what they will be expected to pay under both models, said Peter Intraligi, Invesco’s Toronto-based president and COO. “Your responsibility is to educate, not to limit choice.”

Charles Guay, Montreal-based president and CEO of Standard Life Canada, said his company offers both compensation models, and advised that other firms “get ahead of the curve and adopt a fee-based model sooner than later.” But he cautioned against taking a further step and banning embedded fees and commissions. “The result would be financial inertia” for consumers who are not comfortable with a fee-for-service model, he said, and as a result they would not save enough to finance their retirement.

In his opening address, Greg Pollock, Toronto-based Advocis president and CEO, noted that a 2012 study by the Montreal-based Centre Interuniversity Research and Analysis of Organizations found that investors who work with financial advisors build 2.7 times more wealth and save for retirement at the twice the rate of those who don’t have advisors.

Mr. Pollock also pointed to a BMO Wealth Institute study that shows that Canadian baby boomers have an average of $228,000 in savings – about $400,000 short of the amount they think they will need for retirement.

“If the average consumer has $228,000 in savings, many have considerably less than that,” Mr. McCullagh said. “What kind of advice can they expect to get? Why would we take the choice away from these consumers?”

Ken Kivenko, Toronto-based chairman of the advisory committee of the Small Investor Protection Association, said small investors who don’t need complex advice might benefit from working with advisors with lower qualification levels who charge lower fees. But Mr. Skwarek objected, saying, “fewer assets shouldn’t mean less access to financial advice.”

Mr. Intraligi said his company’s survey shows that small investors are, in fact, subsidized by wealthier investors. Early results of the Invesco Advisor Survey show that small investors, the bottom 80% of advisors’ books of business, pay $81 a month for advice, while investors in the top 20% of advisors’ books, pay $221 a month.