TORONTO (Dow Jones)--Financial advisers in Canada are not very well-regarded when it comes to ethical reputation, according to a recent survey.
In the Canada 2010 Financial Market Integrity Index released by the CFA Institute, financial advisers received a 3.1 score for ethical behavior, which is seventh among nine groups of financial professionals. This year's score was a slight improvement from the 3.0 score in 2009 and 2008.
Canadian financial advisers received the same ethics score as their U.S. counterparts, except that the advisers on the other side of the border placed third from the top on ethical behavior of financial professionals.
Among the other professions surveyed in Canada, pension-fund managers got the highest score, at 3.9; buy-side analysts scored 3.6; corporate boards of public companies, 3.4; mutual-fund managers, 3.4; executive management of public companies, 3.3; private equity managers, 3.2; sell-side analysts, 3.0; and hedge-fund managers, 2.8, which was the lowest.
The survey in Canada was answered by 576 Canadian market players in the financial sector, 5% of whom are financial advisers.
Survey respondents most often cited the ethical behavior of financial advisers as cause for concern. The comments on retail brokers' ethics ranged from a lack of training or knowledge to inherent conflicts of interest, particuarly the inability of advisers to balance profit motives with clients' interests.
"We've heard similar comments in other markets," said Matthew Orsagh, director of capital markets for the CFA Institute. In the U.S. for instance, causes of concern focused on conflicts of interest, adviser incentive/compensation structures, and the suitability of investment advice given by advisers. "The complaints are similar -- advisers need to be more transparent about fees," Orsagh said.
What's unique to Canada is the respondents' concerns about the absence of a single fiduciary standard, which mainly stems from not having a single securities regulator.
Canada currently has 13 securities commmissions, one for each Canadian province and territory. Finance Minister Jim Flaherty last month unveiled proposed legislation for the creation of the Canadian Securities Regulatory Authority. The Supreme Court of Canada will decide whether such a move is constitutional. Alberta, Quebec, and Manitoba don't support the proposed creation of a national regulator.
"The 'one regulator' issue is taking a lot of people's energy," Orsagh said.
On the rosier side, respondents both in and out of Canada agreed that the overall integrity level of financial professionals here was above average and deserved a rating of 3.5.
For the outsiders, the improvement was most significant in the perceived effectiveness of Canada's corporate-governance standards, moving to 3.4 in 2010 from last year's 3.1.
Canadian financial professionals, on the other hand, are far more willing to invest in domestic securities now than at any time in the past three years.
(Evelyn Juan writes about financial advisers and their jobs, with a particular focus on the challenges and regulatory issues facing the brokerage business as it moves from a transaction-oriented model to wealth-management financial advising. She can be reached at 416-306-2025 or by email: evelyn.juan@dowjones.com.)
TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments
No comments:
Post a Comment