Quote:
Originally Posted by Cecil Terwilliger
Licensing and regulations are so complex I'm not sure if it is realistic to expect most advisors to be independent.
Much as we all hate financial institutions dealers like manulife do a tremendous amount of the compliance work.
I think getting rid of them would only increase the amount of sketchy advisors. Then some of the less honest people would have absolutely no oversight at all. At least their dealer shares some of the responsibility to ensure they don't screw over everyone.
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I don't agree with this at all.
As an independent firm, we are completely responsible for our own compliance. That doesn't make us 'sketchier', or reduce the amount of compliance, it makes us
more understanding of the compliance laws and their intent. The amount of oversight doesn't change, the only difference is that we don't have a financial institution doing it on our behalf. Therefore we have to do it all ourselves, making us far more cognizant of the rules and their intent.
Your suggestion that there would be some with 'no oversight at all' completely misses the mark on how things actually work. Independent compliance does not mean less compliance. In fact I would argue it means more.
Also, I would argue that the idea that the financial institution is taking care of your compliance goes back to the comment that Slava made about being independent - if they are taking care of an important function on your behalf, that makes you less independent, by definition.
To your comment of 'increasing the amount of sketchy advisors', this is ridiculous.
One: an advisor's 'sketchiness' is a function of their own actions, and is independent of who is doing their compliance.
Two: in my 25 years of experience with this, I have found the opposite to be true, that the sketchiest of advisors are typically found where their own input into compliance is minimized. It is the firms that 'take care of everything' and just send sales people out there to flog product that attract the worst kind of advisors.
Three: Sketchy advisors who actively want to avoid regulation can actually do so, by migrating to the EMD space. This is a separate problem that having financial institutions taking care of compliance does not avoid.
In fact, I would go so far as to say your comment is offensive. Truly independent advisors, those that have built their own firms and are no longer under the umbrella of a financial institution, tend to be the best of the business, not the worst.
The problem, IMO, lies more with those who work under the protection of major firms and are just out there flogging product without a care or a responsibility towards compliance. Many advisors at the big firms don't have a clue what the regulations are or their intent. (This is a much bigger problem at the Primericas, WFGs and IGs of the world than the Manulifes)
They don't
need to know under the current system.
Again, none of this is an attack on individual advisors. The good ones do the right thing within the framework of how the industry is structured. The issue here is with how the industry is in fact structured.