Read the following article from the Gobe and Mail on the Banks shifting their Financial Planning businesses to a Proprietary Mutual fund offering. Discuss the Pro’s and Con’s of this move as a client and as a Financial Planner or Advisor.

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Rules shouldn’t have prompted banks to halt fund sales: OSC

  • The Globe and Mail (Ontario Edition)
  • September 14, 2021

Ontario’s securities watchdog says new regulations that will soon require advisers to have deeper knowledge of the funds they recommend to clients should not have prompted banks to halt the sale of third-party investment funds.

The Ontario Securities Commission said on Monday that it has contacted Canada’s big banks to ask for more information about their plans to stop selling other companies’ investment funds in favour of narrowing their focus to their own proprietary shelves of funds. The banks are making the switch in response to new rules that require advisers to ensure they are providing products that are appropriate for clients.

“The intention of the client-focused reforms is to give investors access to products that best serve their needs – not to cause a move to proprietary shelves,” OSC spokesperson Kristen Rose said in an email to The Globe. “To reiterate this expectation, we have sent a communication to the banks to confirm how each understands and intends to approach this area.”

The OSC’s communication comes a week after The Globe reported that several of Canada’s largest banks have halted sales of third-party investment products from their financial planning arms.

RBC, TD and CIBC all recently notified clients in their financial planning businesses that third-party funds will no longer be sold for any investment portfolios.

The changes do not apply to any of the banks’ full-service brokerage accounts or do-it-yourself investing clients.

“We are continuing to work with the regulator to ensure we are in compliance as client-focused reforms come into effect and that we are meeting the needs of our clients,” Michael Walker, head of RBC Financial Planning, said in an e-mail.

TD and CIBC declined to comment on the OSC’s latest communication.

The new set of rules – known as the client-focused reforms (CFRs) – are slowly being rolled out to the industry in stages. Changes to the “know-your-product,” or KYP, rule will come into effect at the end of 2021, and will require wealth management firms – and their investment advisers – to have a greater understanding of any investments that are bought, sold or recommended to a client.

The rules are intended in part to address conflict-of-interest concerns such as an adviser’s compensation being linked to proprietary products. Firms will have to create procedures to ensure advisers are putting a client’s interests first when making a suitability determination.

As a result of the rule change, investment firms are looking to reduce the array of products on their shelves, which can require advisers to be trained on thousands of investment funds across multiple asset classes.


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