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Household Finances Where is the ethical leadership in the investment advice industry?

The most glaringly vacant position in the traditional investment advice industry is that of champion for the everyday investor.

Finally, there is an applicant. Rather than following the pack in highlighting blow-out returns, hotshot managers or exclusive strategies, Alberta's ATB Investor Services is positioning itself as a trustworthy firm that puts service ahead of sales.

The uniqueness of this approach was highlighted earlier this month when the country's provincial securities regulators reported on how they will proceed with a proposal to require advisers to put client interests first. Only Ontario and New Brunswick are going ahead; the rest seem to have more or less bought the investment industry's line that tweaking the current rules will suffice in protecting investors.

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"The industry too often does the bare minimum by following the letter of the law versus the spirit of the law," Chris Turchansky, president at ATB Investor Services, said in an interview. "What we want to do as people within the industry is raise our voice and challenge the rest of the industry to put investors first."

Mr. Turchansky believes in doing this by whatever means work best, possibly even the "targeted reforms" favoured by the Gang of Eight provinces that don't support a best interest standard. But he's adamant that something has to change in the investment industry going forward. "We understand that today, the system doesn't work."

ATB stands for Alberta Treasury Branch, which is basically a bank owned by the Alberta government. Mr. Turchansky said ATB measures profitability in a similar way to traditional investment firms, but as a business that is not publicly traded, it has more latitude to focus on long-term growth ahead the short term.

This is how the firm is able to focus on trust rather than flogging investment products to keep revenue and profits growing. Can you generate enough profit by putting clients first in a business where the focus has traditionally been on selling or managing investments? Finally, there's a firm willing to find out. What took so long?

In an online note to Albertans, Mr. Turchansky says investors are doubting their investment firms. He says the industry has become too complicated, with too much emphasis on sales rather than doing what's right for clients. Too often, the true costs of investing are hidden.

Mr. Turchansky is speaking here about issues that have produced a sense of mistrust about the investment industry. However many clients the advice business has now, it could acquire a lot more if it addressed the trust issue.

People are hungry for reliable advice on the finances and help with their investments. You would not believe the volume of basic questions I get from readers via e-mail, on Facebook, on Twitter and through my twice-weekly e-mail newsletter. Why don't these people have advisers they bring these questions to? A big reason is lack of trust.

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Early on in this job, I discovered the need to balance the many smart, ethical advisers I met against the industry's predators and casual incompetents. There are advisers who put client interests first because they believe in it, not because their firms enforce that standard.

For now, there are a couple of encouraging signs that the industry will eventually catch up to its best people. ATB Investor Services is going ahead with its clients-come-first philosophy, even though it's generating some internal debate. "People are nervous about it," Mr. Turchansky said. "Everyone's worried about when you shine a light in your own house, what do you uncover?"

The other encouraging sign is that securities regulators in Ontario and New Brunswick are now crafting a regulatory proposal for a best interest standard that will be published in the next year or so for consultation with the industry. If a firm is registered to do business in Ontario, for example, it would be bound by any best interest standard that is implemented.

Other provinces are looking at a package of reforms that would address requirements for advisers to know their clients and products, and address conflicts that can arise when advisers are paid through the products they recommend. Ontario and New Brunswick want a best interest standard to act as a foundation for future reforms.

ATB Investor Services has no position on which approach regulators should take, but Mr. Turchansky does offer this mission statement: "We would like to put out there that we're doing everything in our power each and every day to work in clients' best interest."

Anyone else ready to step up?

Rob Carrick talks about combining a fee-for-service financial planner and a robo-adviser to help with investment planning
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