“I’m not sure when I became the bad guy,” says Brad O’Morrow of O’Morrow Financial Services in his comment letter on the proposal to ban embedded commissions. It’s a sentiment expressed in other comment letters from advisors.

Read: Proposal to ban embedded commissions threatens industry: letter

Rob Reid of Reid & Associates Financial Solutions says in his comment letter that the proposal reveals regulators’ erroneous assumptions, including that advisors only conduct transactions. With their proposal, regulators “are in the process of causing substantial damage to Canadians and a whole industry of advi[c]e channels,” he says.

Ben Davies, self-described in his comment letter as an advisor for nine years, says, “It seems as if we are taking into account the practices of poor advisors and regulating everyone based on them.”

Over his 20-year career, portfolio manager Stan Penner describes in his comment letter the scams he’s witnessed — including from prospectus-exempt investments, misrepresentation and overpriced insurance products. In contrast, “Never have I seen lives ruined by an extra [0].3% charge on a mutual fund.”

Read: CSA’s embedded commissions ban falls short for clients, say advisors

Davies’ letter describes the financial struggle for those new to the industry: “For the ethical advisor, who is not going to sell DSC funds and whole life insurance to anyone with a pulse, starting this business is very challenging,” he says. He asks regulators, “How are you encouraging younger people to get into this business?”

Lorne Radke, a CFP, takes issue with the proposal’s research that indicates advisors sell funds that provide the most compensation. That assertion “shows a complete lack of knowledge as to what we do and how we do it,” he says in his comment letter, going on to explain how advisors determine client goals and identify how to achieve them. Goals, not MERs, are central when choosing funds, he says.

He also questions why the proposal implies investors be invested in only the best performing funds. “In my over 30 years in this industry, I have never seen […] any evidence that there is a significant correlation between past and future performance,” he says, adding he often suggests investing in underperformers, especially when he knows the fund company and manager.

Read: Have your say at roundtable on embedded commissions

Practical problems with advisor pay

Advisor Debbie Hartzman of Professional Investments says in her comment letter that she surveyed her clients, and they say they don’t want to pay her directly; rather, they “want to be informed and would like choices, but they do not want to be billed independently of their investments.”

Tim Weichel, a licensed life and health insurance broker, agrees in his letter that clients don’t want to write a cheque to a financial planner. “The best system for all financial planning would be to charge by the hour for services rendered, like lawyers and accountants do,” he says.

Hartzman says her clients, who make up a niche market of those experiencing separation and divorce, appreciate that she’s not on the clock. “If we are forced to bill for our time and services, much of what we presently do to service clients will have to fall by the way side, as clients will not be able to pay for services.”

Read: No advice gap from other commissions bans: investors

Similarly, in her comment letter, Barbara Nash of Desjardins Financial Security Independent Network says, “I have read the pension act [and] power of attorney act of B.C.! Why? Because my clients needed answers. […] I don’t get paid to do these things for my clients, so trailers [are] my compensation for this extra and ongoing service.”

Weichel highlights an industry problem not specifically addressed in the proposal: rewards based on assets under management (AUM).

“Financial services companies talk about sales, production and AUM,” he says, “instead of client satisfaction and enhanced client outcomes. Rewards should go to those who provide excellent advice that is in the best interests of the client, not to the best salespeople.”

Read: The fund companies that support banning embedded fees are…

Last man standing: the banks

Independent advisor Kay Crawford notes in her comment letter that conflicts are more of a problem at banks and insurance companies, not at independent dealers. The banks, for example, ” encourage people to borrow money and use credit when it is not in their best interests to do so,” she says.

The proposal will decimate consumer choice, says Steve Kunzel. In his comment letter, he says he works in the industry but comments on behalf of consumers. He foresees banks, along with firms that have both manufacturer and distribution arms (e.g., Investors Group), will launch products with MERs of 2% that are marketed as having no commission. Consumers will be lured, even though they’re still paying the same.

The result: “Canadians are left with vertically integrated manufacturing, distribution and advice controlled by some 20 organizations,” he says. “These organizations will market that you can purchase any product through their channel, but when you leave a [bank] branch, you will have purchased a [bank] product.”

His suggestion to regulators: “If you want to help Canadians create wealth, ask the government to eliminate tax on investment funds and create one regulator for all products, including insurance.”

Read: How to stop banned reps from selling insurance

Read all comment letters.

Advisor.ca has summarized other comment letters:

The fund companies that support banning embedded fees are…

Proposal to ban embedded commissions threatens industry: letter

Banks to CSA: robos not ‘attractive alternative’ in event of commissions ban

No advice gap from other commissions bans: investors

CSA’s embedded commissions ban falls short for clients, say advisors

Industry response to embedded commissions ban: IFIC and Advocis