CIRO's Consultation on Advice in the OEO Channel: Democratizing Financial Guidance for Canadians

Strategic Insights -

A broader modernization of the financial services sector is underway, with the Canadian Investment Regulatory Organization (CIRO) considering the role of order-execution-only (OEO) dealers in providing advice to do-it-yourself (DIY) investors. CIRO's consultation paper highlights the potential for non-tailored advice, such as investor risk profile assessments and model portfolios, to help investors navigate complex financial decisions. Experts argue that this initiative has the potential to democratize advice and provide valuable guidance to Canadians who may not meet the threshold for full-service advice.

Key Takeaways:

  • CIRO's consultation on advice in the OEO channel aims to provide non-tailored guidance to DIY investors, including tools such as investor risk profile assessments, model portfolios, and risk warnings for complex assets.
  • The initiative has the potential to democratize advice and provide valuable guidance to Canadians who may not meet the threshold for full-service advice.
  • Kendra Thompson, founder of Epok Advice, points out that CIRO's consultation is taking place amid a broader modernization of the financial services sector, but notes that evolution has been tied too heavily to product and channel.
  • Ken Kivenko, president of Kenmar Associates, hopes to see CIRO allow OEO dealers to provide non-tailored advice on a broader range of topics, including financial planning, risk analysis, and estate planning.
  • The "sweet spot" for advisors is to provide full-service advice profitably to high-net-worth clients with $1-million of invested assets, but there is a huge swath of Canadians who want advice and information that is one level above financial education.
  • DIY investors were mixed on the value of working with advisors, with some valuing the expertise and knowledge, while others were critical of the cost.
  • A study by CIRO found that investors on DIY platforms who worked with an advisor valued their expertise, while those who had no advisor were more likely to be critical of them.
  • CIRO is in the final stages of developing a guidance notice for DIY firms, which will allow them greater flexibility in the tools they provide to customers.

Statistics:

  • 40 DIY investors were interviewed as part of CIRO's study on the value of working with advisors.
  • 1 million: the amount of invested assets needed to be eligible for full-service advice.
  • 30 days: the timeframe used to monitor volatility in stocks during the GameStop Corp. short squeeze.
  • 80%: the percentage of DIY investors who chose to diversify their portfolios with Wealthsimple after an initial surge of clients during the GameStop Corp. short squeeze.

Sources:

  • CIRO's consultation paper
  • Kendra Thompson, founder of Epok Advice
  • Ken Kivenko, president of Kenmar Associates
  • Alexandra Williams, CIRO's senior vice-president of strategy, innovation and stakeholder protection
  • Claude-Frédéric Robert, president of National Bank Direct Brokerage
  • Blair Wiley, chief legal officer at Wealthsimple Inc.
  • Aravind Sithamparapillai, financial planner at Ironwood Wealth Management Group
  • CIRO's study on DIY investors and advisors