ACCOUNTABILITY, DUTY OF CARE, FIDUCIARY DUTY - WHICH IS IT?

In Canada and in the USA financial advisors who are paid by a financial institution to market, promote and sell their products do so within a systemic conflict of interest. They are incentivized through their compensation agreements to recommend products which are in the financial interest of the institutions which 'manufacture', MGA's who 'wholesale' and advisors who retail them to the consumer.

Within this distribution paradigm the financial advisor who is accountable, who accepts his/her duty of care and fiduciary duty to place the client's interest above his/her own is faced with a financial conflict of interest with every proprietary product choice that is available.

The SEC and the Congress in the US are developing a uniform set of fiduciary rules which are focused on removing the conflict.

Great Britain and Australia have moved forward to a fee for service basis of compensation for financial advisors.

This eliminates the systemic conflict.


The US is trying to solve the issue through legislation (Dodd - Frank) and through the regulatory role of the SEC. At stake is the health of the financial institutions which generate their earnings through the sale of their proprietary products and services. On the other side of the spectrum is the financial health of the consumer who must trust the integrity of purpose of his/her advisor.

The playing field changed with the 2008 financial meltdown and Wall Street's role in it.

The consumer will have a choice. Deal with a sales representative in the purchase of a financial commodity. Or, deal with a professional financial practitioner/Advisor who is compensated on a fee for service basis - as are Chartered Accountants, Lawyers and other professional practitioners who are bound by their fiducuary obligation to their client.

It is an either or choice.

Both choices are available.

The consumer simply must be aware.

Canadians are not immune.

Dan Zwicker
Toronto