WEALTH MATTERS: How CARP is working to improve...
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Feb 17, 2017  |  Vote 0    0

WEALTH MATTERS: How CARP is working to improve investor protection for Canadians

Metroland Media

The following is a Q&A session between Metroland partner Nest Wealth and the Canadian Association of Retired Persons (CARP) on improving investor protection for aging Canadians.

We've all turned on the news and seen the headlines:

"Couple scammed out of their retirement savings"

"Resident of long term care facility mistreated by caretaker"

It's heart breaking. No one wants to imagine this kind of thing happening to their neighbours, parents, or themselves.

Wanda Morris, an advocate for aging Canadians, is no stranger to these stories. She's the VP of Advocacy and COO of the Canadian Association of Retired Persons (CARP) — a 300,000 member, non-profit, non-partisan organization that advocates for improved healthcare and financial security for Canadians as they age.

She's working with organizations and our government to improve the lives of aging Canadians. We sat down with Wanda to hear more about the work they're doing to improve investor protection.

Kate Smalley, Nest Wealth: As an activist, how do you react when you see those breaking news headlines about someone losing their savings to a scam? Is there a way to turn a bad situation into momentum for positive change?

Wanda Morris, CARP: The situations are often terrible and I respond in kind: I'm broken-hearted when people are left destitute by adult children who empty joint bank accounts or abuse their powers of attorney. I'm enraged when con artists use scams and frauds to steal the savings, livelihood and sometimes even the will to live of older Canadians.  And I'm gutted when frail and elderly folk in long-term-care facilities find themselves abused and assaulted at a time they should be protected and cherished. These events are all horrible. But at least having them reported in the media shines a spotlight on the crimes. At CARP, we try to use the resulting media attention to extract promises of reform from our governments and to educate Canadians about how to better protect themselves.

Kate: Tell me about the advocacy work you're doing with CARP to protect investors. What's the number one issue you think needs to be addressed?

Wanda: There are other injustices that, despite causing significant harm, are rarely reported. While the damage inflicted on any individual is rarely newsworthy, the magnitude of the total financial losses suffered by Canadians is hard to overstate. The injustice I speak of is the deficiency of Canadian investor protection and the shockingly high fees and costs paid by individual investors.

A 2015 Morningstar report rated the competitiveness of fees and costs paid by Canadian investors as 25th – out of 25 countries rated. Costs to purchase every type of fund (equity, money market, fixed income) in Canada were more than double those of the A-rated U.S. and substantially above costs incurred by fund holders in Australia and The Netherlands. With a D minus rating, our closest competitors for worst in class performance were Japan and China with their D plus grades. 

Kate: What can be done to better the investment environment for Canadians?

Wanda: At CARP, we advocate strongly for two changes: first, establishment of a standard that resolves compensation-related conflicts of interests in favour of the investor (also known as a best interest standard) and second, introduction of legislation to empower regulatory agencies to collect fines owed by convicted financial rule-breakers.

Kate: What's a best interest standard and how would implementing one benefit the average investor?

Wanda: A best interest standard would require financial advisors to put the financial returns of their clients ahead of their own compensation. Should such a standard be introduced, an advisor couldn't sell you a high-priced mutual fund — that pays a handsome commission — when a more competitively priced version is on offer. It would mean that your advisor couldn't default to recommending proprietary funds created by his or her firm and that they couldn't secure long-term commissions by locking you into products with long-term deferred sales charges when cheaper, better suited and more flexible alternatives abound. 

While Ontario has supported the idea of a best-interest standard, it is still to be implemented. Other provinces have actively opposed it. Lobbyists paid to uphold the current standard have variously argued that a best interest standard will over-promise protections and lead investors astray or, perhaps more honestly, that such a standard would disrupt the current business model of many firms, putting hundreds or even thousands of investment advisors out of work. While financial markets are important in providing capital to businesses and growing the economy, those needs can't be put ahead of, or substituted for, the rights of individual investors to get a fair deal. A best interest standard is needed and it's needed now.

Kate: Why is it important to empower regulators to collect fines owed to them by convicted rule breakers?

Wanda: Regulators like IIROC (the Investment Industry Regulatory Organization of Canada) can impose fines, but currently do not have the authority to collect them. This is a bit like posting speeding limits, issuing tickets, but never enforcing the fines. IIROC is owed $30 million in uncollected fines, but doesn't have the legislative power to collect them.  That's why CARP's current budget submission to the Ontario government calls for legislation to allow regulatory agencies to collect fines owed. This would both encourage better behaviour by those in the industry and provide resources for agencies like IIROC to fight these injustices.

Kate: What would you say in conclusion to readers?

Wanda: It's been a while since I've been in school, but if I'd brought home a D- on my report card — like Canada's grade on the Morningstar report — prompt action would have been the order of the day. When it comes to tackling the costs of investing in Canada, whether it's a best interest standard or the power to collect fines, our government must act to put the needs of investors first, and it must do so now.

Kate: What can people do if they want to learn more about the work you're doing or get involved?

Wanda: If you want to urge the government to put investors' interests first, you can add your name to our investor protection campaign at carp.ca/ProtectMySavings. While you're visiting, you can download some of our resources to help protect yourself. You can also join the organization and add your voice to the 300,000 other CARP members who are standing up for the rights of all Canadians as we age.

Thank you to Wanda for sharing these initiatives with us and leading work with CARP to improve the lives of Canadians.

Kate Smalley is the content marketer at Nest Wealth, Canada's first online subscription investment service.

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