Don’t liken us to telemarketers: Advisors

The advisor community welcomes the new CRCT regulation that binds them by the same rules as other phone solicitors. Apart from a few halfhearted objections to being treated as telemarketers, most said the ruling would only impact new industry recruits, and that it would likely not deter “boiler room” operators.

A recent release from the CRTC said that “unsolicited telecommunications made by investment or financial advisors and insurance agents or brokers to existing clients to sell or promote their respective products or services constitute telemarketing telecommunications under the Rules.”

That’s just fine with Prem Malik, a financial advisor with Queensbury Securities in Toronto. “Any financial advisor who is telemarketing his services is in the wrong business and this is a good decision,” he says. “I have never called a prospect with a product pitch and don’t plan to do so.”

He argues that selling securities by cold calling is not financial advice but “selling of a financial product”, and, therefore, the two should not be lumped together.

Similar sentiments were voiced by Mike Macdonald, vice-president, consulting, Weigh House Investor Services, who asserts that “to call up a non-customer to solicit business is called a ‘cold call’, no different than any other business calling up a non-customer.”

The first sign of dissent comes from D. Tony Mahabir, CFP and CEO of Canfin Financial Group of Companies. “This is not telemarketing, where someone is making a cold call and pushing products down people throats,” says Mahabir. However, he assures that even though he doesn’t agree with the CRTC ruling, “we will play by the rules until the issues are re-opened hopefully in the future.”

Mahabir also takes issue with the decision’s ability to impact such critical factors as “cost, efficiency and expediency.”

“Today’s clients want solutions that are relevant to their unique situation in the shortest possible time.” Citing the golden rule of the industry, ‘know your client’, he asks “What is wrong with saving the client and advisor time via a telephone conversation to explore possible solutions?”

Other methods to keep clients abreast of new changes and innovation to better solve existing concerns could prove costly. “This does not make sense, but ultimately this cost will be passed on to the consumers and investors, as there are no free lunches,” says Mahabir adding that the “one-size-fit-all ruling” is targeting the wrong people. “Depending on your business model, this change may be the finishing blow.”

Mahabir’s objection finds staunch support in Greg Pollock, CEO, Advocis, who says clients’ best interests are being trumped by arbitrary, prescriptive regulation. “Advisors are committed to providing the best possible service to their clients,” he says. “Restricting advisors’ ability to meet clients’ needs will likely hurt clients in the long-run.”

Creating rules like this places additional compliance responsibilities on an already heavily-burdened advisor, he adds.

Particularly vulnerable to the ruling’s impact are newer advisors whose business depends considerably on their ability to develop leads. They will now need to come up with a new game plan.

“The advisors who use professional lead developers will likely be the most impacted,” says Macdonald. “Experienced advisors do not often do cold calls so the new younger advisors will be the ones who need to find better ways of developing leads.”

There are some doubts about the effectiveness of the decision to deter dodgy dealers selling get-rich-quick dreams. “Unfortunately for honest advisors, the ‘boiler-room’ operations will probably ignore the ruling,” says Macdonald.

But even the ruling’s critics stand united in its acceptance of the CRTC decision. “Change is the only constant in our industry, and as such we need to evolve with the times,” says Mahabir.

“Advisors will likely use web-based marketing, mailers or seminars to reach out to the potential new clients,” says Macdonald.

Many other businesses have adapted to the call regulations and so will the advisor business.

To read the CRTC ruling, click here.

(08/20/10)

Vikram Barhat