A regulator-led survey of nearly 3,000 Ontario mutual fund dealers affiliated with major banks found that a significant minority of representatives reported behaviour that may not always align with clients’ best interests.
Conducted by the Ontario Securities Commission (OSC) in collaboration with the Canadian Investment Regulatory Organization (CIRO), the survey revealed that one in four respondents said customers had at least sometimes been recommended products or services that were not in their interest. The findings point to sales pressures and compensation incentives as possible drivers of problematic conduct.
“While it’s clear many bank representatives are prioritizing quality advice, it is also clear that sales pressures and incentivization may be driving concerning behaviours,” said OSC chief executive Grant Vingoe in a statement summarizing the results.
The survey further found that about one in three representatives acknowledged that customers had been given incorrect information at least some of the time. Additionally, 32% of respondents agreed that current compensation structures place more value on sales volume than on the quality of advice provided to clients.
Tension between sales targets and client needs
Respondents described a clear tension between meeting sales targets and prioritizing client needs. On average, dealers reported that variable compensation made up roughly 10% of their total pay, although for some individuals it could be as high as 20%. Even where variable pay is a smaller portion of overall compensation, many dealers said the pressure to reach targets is palpable.
The survey showed that 68% of dealers experienced sales pressure at least sometimes, with 35% reporting they faced sales pressure often or always. Nearly half (44%) agreed that missing targets creates a fear of job loss. At the same time, 23% of respondents felt there was high pressure to sell potentially unnecessary products or services, while 60% disagreed with that specific statement.
Open-ended comments from respondents underscored the tension between incentive-driven targets and putting clients’ needs first. Several dealers noted that when compensation and performance metrics emphasize product sales rather than outcomes or suitability, it becomes more difficult for representatives to consistently act solely in the client’s best interest.
The OSC said its next steps will be to examine sales practices more closely and assess what controls firms have in place to identify and manage material conflicts of interest. That work is intended to determine whether regulatory or supervisory action is needed to better protect investors and ensure suitability standards are being met.
Canadian Bankers Association says report is under review
The Canadian Bankers Association (CBA) and its member institutions are reviewing the OSC/CIRO summary of survey results, the association’s spokeswoman Nathalie Bergeron said in a statement.
“Building and maintaining strong customer relationships is a key focus for banks in Canada. Our members are committed to providing needs-based advice that helps clients reach their financial goals. Banks and their employees prioritize consumer and investor protection measures and strive to put customer interests at the centre of all product and service recommendations,” Bergeron said.
Under CIRO rules governing mutual fund dealers, representatives are required to address conflicts of interest and act in the best interest of clients. The regulators launched this study after a CBC investigation released last year alleged that bank sales targets were pressuring some dealers to push customers into financial products they did not need.
The survey results highlight the importance of clear firm-level policies, robust supervision, training, and compensation designs that align employee incentives with client outcomes. Regulators, dealers and industry associations will likely use the findings to consider changes aimed at reducing conflicts and improving the quality of advice.
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