Will Canadian Investment Advisors (IAs) Survive With Changing Regulations? How Technology Solutions are Coming to the Rescue

Significant changes to Canadian financial regulations in the last few years have made Investment Advisors (IAs) question whether they will be able to survive in the new environment, yet technology is providing the answer. The regulatory changes improve the client’s experience by ensuring a minimum standard of care as well as an increase in transparency. In the aftermath of the 2008 Great Recession, this has taken on added urgency and, therefore, a rapid roll-out. The result is that IAs today face a decrease in compensation due to a shift away from the commission based business model, and an increased complexity and cost of regulatory compliance. Add to that the significant challenge in adjusting to a new approach focused more on the client, and it is clear that new solutions are needed to stay competitive in this environment.

Technology solutions that aggregate and present a complete financial picture of the client can help investment firms bridge the gap from an “investment centric” model to a “client centric” model faster and with less pain. Because of new regulations, IAs need to shift to a holistic investment approach where the client’s entire financial picture is understood before recommendations are made. For some sophisticated clients who only want specific investment advice, the change is unsettling and has resulted in client transfers. IAs can then use solutions like Ticoon’s financial platform or Broadridge’s Dataphile – Canada solution to both educate a client of their complete financial picture, as well as how the IA’s recommendations align with their financial interests.

IAs, especially the small and medium sized are also turning to outsourced technology solutions to handle regulatory compliance. The Canadian regulatory landscape is complex due to the financial industry’s four separate pillars – banking, mutual funds, capital markets and insurance – and their distinct regulations. Furthermore, Canada has an overlapping set of regulatory bodies comprised of central, provincial and industry entities, which has resulted in multi-layered regulations with more on the horizon. Today, both big and small advisory firms find monitoring and staying in regulatory compliance to be a daunting challenge, Firms that do not have the time nor resources to integrate solutions themselves can look to PortfolioAid 360, Subserveo, Charles River, and many others for help meeting current regulatory compliance requirements and to keep abreast of changes in the future.

Many financial advisory firms have begun to seriously consider alliances with discount brokerages and robo-advisors to take advantage of the options and efficiencies they provide. Due to fee-transparency stipulations, firms are moving away from commission-based business models in favor of fee-based models. While this increase in transparency is great for the client relationship, it means a decrease in revenue, especially for financial advisory firms with a smaller client base. Coupled with the additional cost associated with staying in regulatory compliance, some IAs view discount brokerages and robo-advisors as a way to attract more clients and focus on relationship management while the technology does the heavy lifting with a lighter cost footprint.

A new breed of technology solutions that address current and expected needs for IAs is being adopted now. IAs who do not adapt to these changes quickly run the risk of being pushed out of the market. But it is imperative that the technology solutions adopted are not only aligned with needs, but are also cost effective. Many solutions exist in the marketplace and more are becoming available. To stay competitive in the new regulatory environment, IA firms can turn to boutique financial consulting firms, such as IMP Consulting, to determine what solutions best meet their needs. For more information about IMPs expertise in compliance solutions, system selection, and implementation, inquire here.