The costs of imposing a legal “fidcuiary duty” on the Canadian financial community

Ian Whiting Banks, Business News, Communications, Credit Cards, Debit Cards, Debt, Estate Planning, Exchange-Traded Funds, Exempt Market, Finance, Financial Planning, General, Government, Guaranteed Investment Certificates, Insurance, Investments, MONEY®, Mortgages, Mutual Funds, Pension, Personal Finance, Real Estate, Saving, Tax-Free Savings Account

Presuming that reasonable people understand the need for a legally-grounded requirement for advisors – ANYONE who advices, sells, recommends, etc. any financial product or service – to have a fiduciary duty or responsibility, the next question is “WHO IS GOING TO PAY FOR IT?”

I can already hear pundits and armchair quarterbacks and experts pontificating that the industries should cover the cost of this new responsibility – and YES, there is always a cost to regulation – ALWAYS. So let us examine the cost issue a bit further. I have no way of quantifying, at this early stage, the cumulative financial impact of this additional layer of regulation, but it will add costs. For every regulation, someone has to supervise it, train advisors and employees, file reports, etc. PLUS, let’s not forget some amount of government supervision that will require more bureaucrats, auditors, examiners, investigators and support staff along with all of their associated staff and benefits costs.

The easy (and palatable) target is the financial services industry themselves – ALL of it. It is easy, politicians and regulators can say “we aren’t going to raise taxes for this, we will make all of the players pay”.

Unfortunately, this is utter nonsense of course – the only payor is the consumer – the user of the products and services is always the payor. Businesses are not going to reduce their profit expectations to their shareholders due to more regulation and the costs associated thereto. Those costs are going to be reflected in what those businesses charge for their products or services. Whether it is insurance premiums, MERs, fixed costs, reduced benefits, higher rates on loans, administration fees or something else, we, the consumers will pay for this new duty.

Please, don’t jump on me thinking I am using this as an excuse to try and stop this move – I am not – I firmly believe that EVERYONE who advises consumers about ANYTHING to do with their money, investments, financial affairs, credit, loans, mortgages, payday loans, real estate agents, general insurance agents, life insurance advisors, bank tellers, etc. SHOULD have a legally-mandated fiduciary duty and responsibility – I just don’t want people to think they are getting something for free! Remember TANSTAAFL (see a previous blog from 2012)

So the issue now is what is the limit that consumers are willing to pay for this added “protection”? How much is it worth to each of us

Ian Whiting

Ian R. Whiting CD, CFP, CLU, CH.F.C., FLMI (FS), ACS, AIAA, AALU With more than 40-years of experience in the industry, Ian has qualified 3 times for MDRT, completed LUATC in 1979, the LUAC Financial Planning Skills Course and attended numerous Schools in Agency Management and Sales Management through LIMRA. He obtained his CLU in 1987 while also completed his IFIC qualification and completed his Fellowship in the Life Management Institute with a specialty in Financial Services in 1988. In 1989, he completed qualifications for his Chartered Financial Consultant designation. In 1992, he qualified as an Associate of the Academy of Life Underwriters (Head Office underwriter qualification) and in 1993 he completed his Associate, Customer Service designation program through LOMA. In 1997, he qualified as a CFP and also completed his courses and exams to obtain the Associate, Insurance Agency Administration designation. In 1999, he completed the study and examinations to qualify as a Trading Officer, Partner and Director for Mutual Funds with the BC Securities Commission. As a result, he is also qualified as both a Branch Compliance Manager and Head Office/Provincial Compliance Officer. He served for nearly 18 years with the Canadian Forces (Air) Reserve (reaching the rank of Captain) primarily working with Air Cadets and was award the Canadian Forces Decoration (CD) in 1982. Long known as a maverick and forward thinker in the financial services world, Ian enjoys the challenge of learning new material and planning for the future evolution of his chosen profession.