CSA is consulting on the “option” of discontinuing embedded commissions, instead of moving more quickly to an outright ban. That leaves some analyzing the challenges of moving to a fee-based model, and others lamenting the slow pace of regulatory change.

Read: Get ready for a commissions ban

The proposal is “provocative,” says Lynn McGrade, a partner with Borden Ladner Gervais in Toronto, and indicates that regulators “haven’t completely made up their minds.”

But the onus is now on industry participants, if they’re disappointed with the proposal, to bring other options into the mix by commenting on the paper. “They’re going to have to produce evidence-based research to come back to the regulators to make their case,” she says.

Ken Kivenko, president and CEO of Kenmar Associates in Toronto, says he isn’t surprised CSA proposed the option of a ban instead of a ban itself, because mere talk about commissions has been around a long time — since the 1995 Stromberg report.

“Everybody’s way ahead of [Canada],” he says, listing Australia, New Zealand and the U.K. “Advice in Canada is still a transaction, and that’s a problem.”

Marian Passmore, director of policy and COO at the Canadian Foundation for the Advancement of Investor Rights in Toronto, says academic and independent research shows that Canada has some of the highest mutual fund fees in the world. She appreciates the recognition by the regulators that both investors and market efficiency suffer thanks to embedded commissions.

But moving ahead with the proposal could prove challenging.

Bernard Pinsky, a partner at Clark Wilson in Vancouver, says, “People tend to not recognize the value of advice, and therefore they will not want to pay upfront fees,” which could potentially force investors away from mutual funds into riskier securities. Further, if robo-advisors take up the slack, he questions if Canadian investors, who may know little about financial products, can effectively use them.

Read: Banned commissions another threat to advisory services, groups warn

Although the proposal suggests a ban would result in the promotion of lower-cost, passive products, Pinsky says it could promote churning as brokers become dependent on commissions from sales and repurchases.

(The proposal recognizes the potential for reverse churning: brokers collect upfront fees and do little else for clients.)

Pinsky expects even greater consolidation as the industry goes fee-based. “Lots of advisors and dealers […] are not going to be able to compete if this comes into play.”

Ian Russell, president and CEO of the Investment Industry Association of Canada, says the industry needs time to transition to fee-based accounts and to develop new low-cost advice mechanisms and products for small investors.

But time may not be on the proposal’s side. If the proposal doesn’t pass before the OSC is subsumed into the Capital Markets Regulatory Authority — set to launch in 2018 — “this initiative would lose [its] primary leadership,” says Kivenko.

Also read: Cowan named chief regulator for Capital Markets Regulatory Authority

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VSIVA, I agree with some of your points, but I disagree with banning LL and encouraging people to go solo. 90% of population has little or no knowledge about investing. Most people that use direct investing usually go after the flavor of the month: they buy the last year best performer and sell when the market retracts.Our job is not to sell a product and abandon the client. We keep in touch with clients and we intervene when the market is down and convince the client to be rationale. The LL is also a deterrent for the client to give a chance to the investment to grow. The LL is like a term deposit at a bank. Why it is accettable for a bank to lock in for 5 yrs and not 2 or 3 to mutual fund. Does the bank absorb the cancellation fee? Why us? The independent financial advisors as it is does a very good job in the community. When clients are unsatisfied they change!Those advocates that are so adamant about our embedded fees what do they know about our servicesto the clientele? Our extra advises we give, our time spent on counselling or researching products and managers we recommend? And who will be the bigger loosers? the small investors and the young starters and a large amount of people that will end up paying even higher fees. Unfortunately the biggest problem is us. We never took the time or effort to counter CSA or the lobbyists advocates to make them understand our job that is vital especially those that have little and those that rely on term deposits to plan their retirement. By the way is Marian Passmore and those accademics touting fee base disclosing their salaries and how they justify them?

Tuesday, Jan 31, 2017 at 2:00 pm Reply


This discussion and eventual decision on which way to move is a good one however, quotes like “Everyone is way ahead of Canada” is highly inaccurate. Also, is going in a different direction “way ahead”? Again, I welcome the discussion and I have seen some good things come out of it in my business, I just ask that we refrain from the rhetoric.

Tuesday, Jan 31, 2017 at 11:17 am Reply


Writing an article with writer’s and other views or commenting is easy but making a ruling / decision that pave way to help all investors isn’t easy.

Everyone wants the fees to be down as it must help investors.

That’s why CSA continues to discuss in order to make it’s important decision: It may be important and consider making changes gradually one by one:

– Initially it’s good to ban DSC /LSC load type purchases
– All DSC charges should be charged back to Advisors / Dealers and not to investors
– No more Free units transactions
– Fund and product issuers must provide comprehensive reporting including Gross amount invested, Amount withdrawn, Net amount invested, Current market value, Change in value and 1, 3, 5, 10 and since inception compound rates of return on all statements

– At present many Canadian investment industry participants are with outdated systems;
– Many Fee For Service Advisors charge up to 1.50% on the total assets including money market that is quite high compared to trailing commission paid to advisors /dealers on FE Units; Will Fee For Service Model help investors? Absolutely no.
– CSA should allow investors providers / Fund companies to offer products directly to investors like in UK, Australia and US and many young investors do not require Advice
– Similar to facilities in UK, Australia, Platform providers should facilitate investors invest through their platform for a low fee that will save lot of unnecessary fee and charges.
– Interactive Brokers ( provides one of the best platforms globally and in Canada to trade globally at very low commission, outstanding tax and account reporting. Canada needs 21st century state of the art technology at fair price to consumers.

Friday, Jan 20, 2017 at 6:29 pm Reply