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The idea that investors will be adviser-less if fee reforms are made is wrong. Online advisers are already emerging as a cost-effective way to build a retirement savings plan.scyther5/Getty Images/iStockphoto

Advisory minefield

Re Why we'd celebrate a ban on trailer fees (July 20): Regulators should not get into the business of determining whether an individual or individuals are getting value for their money from financial advisers, save perhaps in clearly extreme situations. The courts have wisely chosen to generally stay out of this sort of minefield.

David O'Leary's suggestion that financial literacy be promoted should be the first step in making Canadians aware of the need to consider what it is exactly they are being offered and why.

Perhaps a reasonable level of awareness will reduce public susceptibility to various scams, frauds and overhyped promotions.

Richard Austin, Toronto

Despite the suggestion otherwise, there is strong evidence that Britain's ban on embedded commissions has resulted in an advice gap in that country. The harmful effects of forcing investors to pay directly for advice have been publicly acknowledged by Britain's own Financial Regulatory Authority.

At its annual public meeting this month, the FCA's chief executive acknowledged that its package of reforms, including the commissions ban, has driven advisers from the market and made the cost of advice prohibitively expensive for many investors. This conclusion is supported by the regulator's data showing that the proportion of retail investment products sold without advice has significantly increased since commissions were banned, from roughly 40 per cent in 2011-12 to about two-thirds in 2014-15.

No one is suggesting that investors be forced to pay commissions – simply that they continue to have a choice in the matter. Not everyone can afford to pay an up-front hourly fee of $100 to $300.

Banning commissions would put financial advice beyond the reach of those who need it most, and that's nothing to celebrate.

Wade Baldwin, president of Baldwin & Associates Financial Services, Calgary, and chair of Advocis, the Financial Advisors Association of Canada

Fee transparency for financial advisers is long overdue in Canada. The Canadian Securities Administrators' new CRM2 rules, which just came into effect (What new disclosure rules for advisory fees mean for you, July 15), will provide investors with a clearer picture of the fees and remuneration their brokers, advisers or portfolio managers receive in return for their investments – but will fail to deal with the biggest challenge facing investors.

Advisers are still under no obligation to tell their clients about opportunities that are in their best interest, only those that are suitable. As a result, investors may miss out on investment opportunities simply because a suitable investment better rewards their advisers.

When reviewing investment opportunities, investors should ask their advisers whether all of their existing or proposed investments are truly their best options, not just whether they are suitable.

Only when advisers are obliged to inform clients of all their options will the industry be able to claim true fee transparency.

Mo Lidsky, partner and senior managing director, Prime Quadrant, Toronto

This all reminds me of the best advice I ever heard about choosing a financial adviser: "If he's not rich, don't listen to him."

Martin Birt, Markham, Ont.

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