A few points re: CONNOR FINANCIAL REFUSES OBSI COMPENSATION RECOMMENDATIONS
This is much more than an advisor providing unsuitable advice: regulation, distribution culture, advisor skill sets and much more lie at the heart of these 3 cases.
Number 1, is obvious: just by reading the Connor Financial name and shame cases, it should be clear how current regulation facilitates disorganised sales led service processes. Better organisation and structure that would be found in a best interests standards/fiduciary duty paradigm may well have obviated the unnecessary outcomes noted.
Number 2: note how much time is spent in the reports trying to prove the client’s knowledge or lack thereof and then compare this against the anarchy of the recommendations. It would be far better if advisors were forced to provide structured, accountable, well thought out processes capable of delivering disciplined and appropriate financial solutions.
Number 3: the KYC form, where the client selects %s in various risk compartments, is not helpful in relating the risk of the recommended investments to the risks they pose to the ability of their assets to meet financial needs over time. Risk allocation is dependent on a number of factors: investment discipline; size and timing of financial needs and inflows to the portfolio; relative and absolute valuation and methodology for dealing with such as well as client risk aversion and risk preferences. In fact, you cannot determine what the allocation of a portfolio should be without first going through an optimisation of all the relevant factors determining structure. Investors need to be warned that the risk profile of the standard KYC is for sales profiling, more helpful to the advisor than the client and wholly inappropriate for solving complex financial needs.
Number 4: it is clear from the reports that the advisor is attempting to provide a higher level of sophistication than he is capable of delivering. This is a generic regulatory issue. To a large extent the blame and the liability for the outcome should rest with regulators and legislators for allowing a low standard, transaction based regulatory regime to continue for as long as it has.
Number 5: the clients noted in these 3 cases have needs that depend on strategies and allocations that can safely manage capital depletion over time. It should be clear that this is a fairly complex area (not even OBSI were able to provide the necessary modelling and analysis) and one which current skill sets, suitability processes and regulation are largely incapable of helping deliver.
Regulation, distribution culture, advisor skill sets and much more lie at the heart of these 3 cases.