The CCIR is working on a total cost reporting project with the Canadian Securities Administrators.courtneyk/iStockPhoto / Getty Images
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Between banning deferred sales charges on segregated funds and releasing a scathing report on best practices for dealing with errors in managing general agencies (MGAs), it’s been a busy year for the Canadian Council of Insurance Regulators (CCIR). They say all the projects are aimed at protecting consumers better.
Globe Advisor reporter Deanne Gage spoke with Huston Loke, incoming chair of the CCIR, who is also executive vice president of market conduct at the Financial Services Regulatory Authority of Ontario (FSRA), about these organizations’ extensive to-do lists.
What are your main objectives for this year?
The first one happened earlier this month. As of June 1, we announced a ban on deferred sales charges (DSC) on new individual segregated fund contracts. Any new segregated fund purchased after June 1 will not be subject to a DSC to get out of the contract. Investors will not have to pay redemption fees to access their own money.
Now, the CCIR is working on a total cost reporting project with the Canadian Securities Administrators. Investors currently receive statements on how much their advisor is charging for fees. But for this next stage of the project, they’ll also have information about fees paid from the asset management and the trading side of the equation. Those are not being reported now on a consistent basis.
This information, which we call total cost reporting, will be available to all investors, whether they hold segregated funds or the more traditional mutual funds. Investors generally need more information about what they’re paying. That makes them more empowered, [and] helps them make better decisions.
What has been the industry feedback on this total cost reporting project?
We have received some concern that this project imposes considerable costs on the industry. At the back end, someone has to re-engineer the systems. We have asked for some granular information where the manufacturers and the distributors will have to work together to provide additional reporting. But we think that the benefits and the information to the investors outweigh the costs involved.
In a recent report, you outlined best practice issues with some MGAs. Were you surprised to see how many life agents were in breach?
That was a random sample of life agents but we were very disappointed about the lack of analysis on the appropriate use of life insurance. In those cases, customers were not being well advised or getting the kind of protection they needed. They may be lacking the right type of policy or the policy may not cover the risks that are most important to those customers.
For title protection, why did FSRA choose to set it up the way it did?
You have two choices for setting up a title protection framework. One is not using any title that talks about wealth, investments or money. The other choice is strengthening what it means to be a financial advisor and a financial planner. And that’s exactly the way our framework operates. You have to have certain proficiency; you need continuing education; you need ongoing accountability. We’re continuing to review submissions about who is able to assign titles of financial advisor or financial planner. Right now, we have four credentialling bodies approved.
Why not just restrict most titles from being used?
It becomes it’s a much larger exercise. At some point, you have to let them use some protocol because they do something, right? Investment counsellor, wealth advisor, product specialist, salesperson ... You’d have to make a conscious decision that people can’t call themselves anything, which is difficult. Because these folks do certain things right now and some of the titles are protected by regulators. If we would go and say you can’t use any of those titles, then that creates another problem.
How do you handle enforcement if someone’s using a title they haven’t been given permission to use?
We’re still in the implementation stage. We’re giving the industry some time to come up to speed and to make sure their business cards, websites, and social media presence accurately reflect the title they’re permitted to use.
We do intend to create a searchable registry for individuals who are permitted to use the titles financial advisor and financial planner. So, if you encounter someone and you want to see what credentials they hold, then you’ll be able to go to a centralized website, punch in that individual’s name and you’ll be able to see what credentials they hold and any regulatory sanctions against that individual. That’s not currently something that’s available. We think it will be a big step forward in terms of setting investors up to know about the individuals they’re working with.
How much time is FSRA giving the industry to come up to speed?
We’re planning to announce exact timetables this summer of when we believe the transition period should end and [then] we should move into full implementation.
This interview has been edited and condensed.
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