TORONTO, July 9, 2014 /CNW/ - According to a new study of small and medium-sized businesses (SMBs) providing financial advice in Canada, the sector is an important contributor to the economy and the financial health of the population – but these benefits could be eroded if regulatory proposals currently being considered by the Canadian Securities Administrators are adopted.
Sound Advice: Insights into Canada's Financial Advice Industry, conducted by PwC and commissioned by Advocis, is the first comprehensive analysis of its kind in Canada. The report highlights the significant economic contributions of the Canadian SMB financial advice sector which directly employs 182,000 people and contributes $19 billion to GDP. When indirect spin-off benefits are factored in, the sector accounts for 1.4% of Canadian GDP and 1.5% of total Canadian employment.
Approximately 80,000 SMB financial advisors in this segment are well-positioned to provide comprehensive and accessible financial advice to the Canadian mass market of 12 million households. Most of these advisors are dual licensed, able to sell securities, mutual funds and/or life insurance, and provide a range of services including investment, tax, risk management, retirement and estate planning.
"The SMB financial advisors play a unique role in the financial advice industry by virtue of the range of products and services they provide, the consumers they serve, and the value they provide those consumers," says Davis Yoo, co-author of the report and Senior Advisor at PwC.
The mass market makes up a key base for SMB advisors, as a large number of SMB financial advisors' clients are among the 80% of Canadian households that have less than $100,000 in financial assets. These are often the families and individuals most in need of financial advice, and the vast majority of clients pay for their financial advice through sales commissions, rather than by fee-for-service. Having access to financial advice helps Canadians accumulate more wealth long-term and allows for better financial literacy and retirement readiness.
Byren Innes, Senior Strategic Advisor at PwC and co-author, adds: "Financial advisors do more than provide short-term financial planning advice. They engage in a long-term relationship with clients to help Canadians accumulate greater wealth and pave the way for better saving strategies and retirement planning."
However, the study warns that any measures designed to improve investor protection must be balanced with the need to ensure continued access to financial advice for the mass market.
Similar reforms implemented in the UK and Australia – particularly banning sales commissions and requiring advisors to have fee-for-service arrangements with their clients – have led to an increase in costs for financial advice, putting it out of the reach of many low and middle-income individuals. As well, the reforms have resulted in a large percentage of advisors leaving the business (an estimated 25% in the UK).
"We need a system that serves investors at all income levels," says Greg Pollock, President and CEO of Advocis, The Financial Advisors Association of Canada. "Given Canadians' concerns around cost of living and retirement readiness, it's critical that more people – not fewer – are able to seek professional financial advice."
The study concludes that regulatory reform must recognize the important role that SMB advisors play in their clients' financial needs and the Canadian economy as a whole.
Advocis, The Financial Advisors Association of Canada, is the largest voluntary association of financial advisors in Canada with more than 11,000 members. It is the definitive voice of the profession, advocating for professionalism and consumer protection. Professional financial advisors and planners are critical to the economy, helping consumers make sound financial decisions that ultimately lead to greater financial stability and independence. Advocis works with decision-makers and the public, stressing the value of financial advice and striving for an environment in which all Canadians have access to the advice they need. To learn more about Advocis, visit www.advocis.ca.
About PwC Canada
PwC Canada helps organizations and individuals create the value they're looking for. More than 5,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 184,000 people in 157 countries. Find out more by visiting us at www.pwc.com/ca.
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SOURCE: Advocis, The Financial Advisors Association of Canada
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