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Several of Canada’s largest banks recently announced they will condense their product shelves to no longer offer other companies’ investment funds to clients in their financial-planning divisions.

Nathan Denette/The Canadian Press

The head of Toronto-Dominion Bank’s wealth management division says a decision to no longer sell third-party investment funds was not a “dramatic move,” as a majority of mutual fund assets held by clients were already TD products.

Several of Canada’s largest banks recently announced they will condense their product shelves to no longer offer other companies’ investment funds to clients in their financial-planning divisions.

The move to eliminate third-party products is in response to new rules that require advisers to have a greater understanding of the products they recommend and ensure they are providing products that are appropriate for clients.

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However, the decision by three major financial institutions prompted the Ontario Securities Commission to reach out to the banks on Monday for more information about their plans to stop selling other companies’ investment funds.

Leo Salom, TD’s group head of wealth management and TD Insurance, told The Globe and Mail that the bank has “worked closely” with the OSC and the Investment Industry Regulatory Organization of Canada to ensure the rule changes – known as the client-focused reforms – are “implemented in their full expression,” and added TD will continue to work with the regulators.

“We do believe that offering a proprietary shelf is consistent with the client-focused reforms” Mr. Salom said.

“That said, we have an obligation to both disclose the relationship to ensure that our due diligence process with regards to the products that we’re putting on the shelf is in fact in the client’s best interest and that we are constantly monitoring for that to be the case. And we will certainly do that.”

Royal Bank of Canada, Canadian Imperial Bank of Commerce and TD 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.

At TD, this means financial advisers licensed to sell securities at TD Wealth Private Investment Advice are still able to access third-party funds, an option Mr. Salom said is still available for clients looking to access more than 3,000 independent investment funds for their portfolio. (Typically, these clients would need more than $500,000 in investable assets to qualify for an investment adviser relationship.)

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As well, investors can also access third-party funds by opening a self-directed trading account on TD Direct Investing, or through TD Goal Assist, the bank’s financial planning mobile application that caters to clients who may need more hand-holding when setting up self-directed investing.

The bank’s group of 1,100 financial planners that are affected by the removal of third-party funds are based within TD bank branches. Unlike traditional mutual fund-licensed advisers from retail branches, TD financial planners provide more sophisticated advice to mass affluent clients with more than $150,000 in investable assets.

Mr. Salom said the shift to a proprietary shelf at TD Wealth Financial Planning will have a minimal impact on the business as the “vast majority” of funds sold – prior to the introduction of client-focused reforms – were already held in TD funds. Only about 15 per cent of the funds on the product shelf available to financial planners were third-party products.

“This simply simplified the structure for that channel,” he added.

“We believe that our clients are very well-served by having TD Asset Management as that investment adviser of choice. Being the largest institutional money manager in the country, TD Asset Management has a tremendous amount of investment product ‘know-how’ and asset allocation expertise.”

If for any reason TD Asset Management does not have a capability in a particular asset class, Mr. Salom said the bank looks to hire a subadviser – an outside investment management team.

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Nonetheless, more than 100 TD financial planners have already begun to move their businesses over to TD Wealth Private Investment Advice where they will be able to continue to access third-party funds.

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