Seniors group calls on Ontario government to change position on DSCs

The Ontario government should support the CSA’s proposals to ban deferred sales charges, says seniors group CARP.

In a letter to Ontario Finance Minister Vic Fedeli, CARP calls the proposals “overdue investor protections.” The reforms make seniors safer and save the government money, since “financially secure seniors do not require assistance through social welfare,” the letter says.

With DSCs, the client is locked in and the “financial advisor unduly benefits by receiving an extraordinarily high upfront commission”—typically 5% of assets invested, says CARP. That payment “bears no relationship to services performed by the advisor for the client.”

The subsequent skewing of the market into higher-paying funds makes it “harder for people to save, invest in housing or business ventures, or fund their retirements,” says CARP, adding that seniors are the overwhelming majority of those harmed by DSCs.

The Ontario government came out against CSA’s reforms, saying they eliminate an option for purchasing mutual funds.

In its letter, CARP pointed to its more-than 200,000 Ontario members and their influence at election time.

Stick with the status quo

In contrast, an AGF blog post says, “There is little evidence to suggest that Canadian investors are either harmed or even concerned about the status quo.”

Chairman and CEO Blake Goldring said proposed KYP reforms, in particular, could narrow the available product set, resulting in less competition and innovation.

Those reforms include an express requirement that dealers and advisors thoroughly understand the securities they sell and how they compare to similar securities on the market.

The manager maintains that investors should have choice, and regulatory changes shouldn’t infringe on access to investors’ desired advice model.

Says Goldring: “We believe all Canadian investors should have access to the advice model of their choice and the flexibility to choose the right compensation model as agreed to between the investor and their advisor through open and transparent dialogue.”

Read the full CARP letter and AGF blog post.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.