A report published by the University of Calgary’s School of Public Policy recommends against replacing commissions with separate fees for investment advice.

While author Pierre Lortie admits that advisors may face a conflict of interest if they receive differing amounts of commission depending on the products they recommend to clients, he suggests that eliminating commissions could end up being counter-productive since it would create an "advice gap"; less wealthy clients would be left without access to professional help since their small account balances would not justify the advisory fees.

United Kingdom experience

Lortie points out that after regulators in the United Kingdom decided to unbundle fees, the number of financial advisors fell from more than 40,000 in 2011 to just over 31,000, and the opening of investment accounts worth less than 100,000 pounds fell by half. When authorities in Australia introduced also these kinds of measures, he says the results were similar.

The paper argues that many clients are simply unwilling to pay upfront for unknown results. If legislators and regulators want to help Canadians better prepare for retirement, Lortie says any reform that causes investors to separate from their advisers, or to never hire one, would be counterproductive. If there is one thing more problematic than clients receiving potentially conflicted advice, he says it is clients not having access to any advice at all.

Better ways to address conflicts

"If it is adviser conflicts that regulators are worried about, there are better ways to address them — for example, the regulatory regime governing fiduciary duty and the potential to enhance the competencies, proficiency and professionalism of financial advisers — than creating a system that results in fewer people providing financial advice, and fewer people willing to seek it," concludes the report.