Misdirected criticisms prove need for more reform in financial services

In recent comments in the National Post Ed Waitzer attempts to deflect criticism of his earlier article Regulate outcomes, not rules but fails to address the message of that article, which was ““It is now time to stand back and review the landscape and consider the impacts of the many new rules that have been put in place”.  This is also the argument of those who oppose the introduction of best interest standards and the removal of transaction based remuneration. 

It is hard to believe that critics of the original article mistook the writers for the piece, as Waitzer suggests.   Yes, the timing was odd, yes, the fact that the article was co-authored with a member of an industry interest group was odd, but the message was also odd and would have stood out irrespective of any shadow and whatever the light. 

In his current defense he does state what his previous positions “have been”, but these are curiously and carefully worded in the past tense. 

Interestingly he provides further oblique substance to his position on best interests, a substance which I feel muddies the waters further :  “My point has consistently been a simple one. If financial professionals are selling advice, it should be in the best interests of their clients…..That said, I’m increasingly concerned about the ability of Canadian securities regulators to get to that simple result – they’ve been at it for decades with limited success. For that reason, I have also advocated structural solutions

The point may be brief, but it is by no means simple or easy to implement, so to conclude that because the regulators are struggling with simplicity that they should abandon the objective  does not compute.   However, I do not believe that the OSC, bar the FDM blip, has spent decades trying to bring in best interest standards.  One could argue with supporting facts aplenty that they have spent decades trying to improve the regulation of the transaction.

But I am interested, and perhaps I may be mistaking the verbal construct, but just what does “selling advice” mean?   I think perhaps that Ed does not fully understand what best interests within a financial services process actually means, because I feel that the context he is referring to is the current context of transaction based advice.   Ed’s defense has further clouded the intent and meaning of his arguments and done little to raise the public debate.

I would be interested in knowing the detail behind this particular comment: “rules should be designed to guide the behaviour of industry players in meeting agreed upon outcomes”.

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