: IGM Financial - Submission

June 15, 2016

Delivered by Email: Fin.Adv.Pln@ontario.ca

Expert Committee to Consider Financial Advisory and
Financial Planning Policy Alternatives
c/o Frost Building North, Room 458
4th Floor, 95 Grosvenor Street Toronto,
Ontario M7A 1Z1

Dear: Committee Members

Re: Preliminary Policy Recommendations of the Expert Committee to consider Financial Advisory and Financial Planning Policy Alternatives (the “Recommendations”)

We are writing on behalf of IGM Financial Inc. (IGM) in response to the Recommendations dated April 5, 2016.

Background on IGM Financial

IGM Financial Inc. (IGM) is a diversified financial services company and is one of Canada’s largest mutual fund manufacturers, with approximately $135 billion in total assets under management as of May 31, 2016. Its activities are carried out principally through Investors Group Inc. (“Investors Group”), Mackenzie Financial Corporation (“Mackenzie”) and Investment Planning Counsel Inc. (IPC) and their respective subsidiaries. IGM is a member of the Power Financial group of companies.

IGM’s subsidiaries include a number of securities registrant firms that are registered in various categories with all members of the Canadian Securities Administrators (CSA) including portfolio managers, mutual fund dealers and investment dealers, and include members of the Mutual Fund Dealers Association of Canada (MFDA), and Investment Industry Regulatory Organization of Canada (IIROC).

Investors Group carries out its distribution activities through its subsidiaries Investors Group Financial Services Inc. and Investors Group Securities Inc., which are members of the MFDA and IIROC respectively and who have more than 5,300 representatives between them.

IPC carries out its distribution activities through its subsidiaries IPC Investment Corporation and IPC Securities Corporation, which are members of the MFDA and IIROC respectively and who have more than 950 representatives between them.

General Comments

We thank you for the opportunity to comment on the Recommendations. IGM supports the Ontario government’s review of the need for regulatory oversight for providers who use the title and hold themselves out as “financial planners”. We strongly believe a financial plan and advice is critical to the financial well-being of Canadian investors. In fact, Investors Group continues to set itself apart by offering personal, comprehensive financial planning through 114 region offices, represented by over 5,300 representatives to approximately one million clients across Canada. We encourage and provide financial support to representatives to obtain the Certified Financial Planner (CFP) designation or, in Quebec, the F.PI. certification. At December 31, 2015, we had 1,531 representatives who held the CFP designation or F.Pl., and another 722 enrolled in the programs. The number of those preparing for and holding these designations rose 22% during the year.

We generally support the approach outlined in the Recommendations, and agree with the guiding principles identified by the Expert Committee. We have, however, indentified some high level concerns with respect to some of the Recommendations, in part due to the broad scope of financial advice and activities that are captured. As the Expert Committee has stated that Recommendation No. 9 falls outside of their mandate, we suggest that this Recommendation not be included in its final report. Finally, we are also mindful that as these requirements would apply only in the Province of Ontario and may not be harmonized across Canada, issues will arise for firms that operate nationally and for dealing representatives that have clients both in and outside the Province of Ontario. We strongly encourage the Expert Committee to consider and make recommendations that provide for a harmonized regulatory approach.

Our comments are set out below.

Recommendation No. 1 – Regulation of Financial Planning in Ontario

We are concerned that the recommendation to regulate firms and all individuals that provide financial product sales and advice and/or financial planning activities in Ontario is too broad. This scope could potentially have the unintended consequence of causing confusion and creating duplicative regulation by capturing financial advice and activities already regulated under National Instrument 31-103 (NI 31-103) and the equivalent rules of IIROC and the MFDA and / or alternatively, may cause firms and individuals to move away from providing certain financial planning services not intended to be captured (such as credit counselling). This result, in our view, is inconsistent with the principles identified by the Expert Committee to guide their recommendations.

It is difficult to draw a precise line between financial advice and financial planning activities. Financial advice is provided on a continuum which ranges from basic information and financial concepts, to formal needs analyses, to modular and comprehensive written financial plans, all tailored to meet the needs of the specific client. We believe the current Know-Your-Client (KYC), Know-Your Product (KYP) and Suitability requirements under securities regulation effectively oversees the delivery of financial advice and activities by firms and individuals. What is needed is specific regulation for individuals who use the title and hold themselves out as financial planners so that there is clarity in what is expected of “financial planners”. The need to avoid unnecessary or duplicative regulation and be sensitive to existing policy initiatives is particularly relevant in this instance, given the scope of the proposals contained in CSA Consultation Paper 33-404 Proposal to Enhance the Obligations of Advisers, Dealers and Representatives toward their Clients released on April 28, 2016 (CSA Consultation Paper 33-404) which proposes to expand the investment needs and objectives analysis for registered firms and individuals akin to financial planning services. In our view, the Recommendation as drafted is so broad that it could be read as capturing every dealing representative of all dealers based upon the current KYC, KYP and Suitability requirements together with proposals in CSA Consultation Paper 33-404.

We therefore suggest that instead of regulating the broad categories of financial planning advice and activities, a more practical approach would be to focus on the regulation of the use of the title financial planner or equivalent and the express holding out as a financial planner.

Recommendation No. 3 – Statutory Best Interest Duty

As the Expert Committee is aware, CSA Consultation Paper 33-404 contains a proposal to introduce an over-arching “regulatory” best interest standard for registered firms and individuals under NI 31-103. And as indicated above, the scope of the proposals in the Recommendations captures a broad range of financial planning advice and activities within the existing KYP, KYC and Suitability requirements. Accordingly, consistent with the principles identified by the Expert Committee’s to ensure its recommendations are not complex and to avoid unnecessary duplication, as well as to promote regulatory efficiency and consistency and be sensitive to existing policy initiatives, we strongly urge the Expert Committee to defer the Recommendation of a statutory best interest duty to firms and individuals that use the title and hold out as financial planners pending the outcome of the CSA’s Consultation Paper 33-404.

Recommendation No. 5 – Referral Arrangements

As noted, we are concerned that the scope of the Recommendations generally to regulate firms and all individuals that provide financial product sales and advice and/or financial planning activities in Ontario is too broad.

With respect to referral arrangements, we believe NI 31-103 and applicable IIROC and MFDA rules effectively regulate this activity today for firms and individuals captured by these requirements. CSA Consultation Paper 33-404 further discusses referrals in the targeted reforms and, as such, this recommendation would have the unintended consequence of causing confusion, and creating inconsistent regulation for such arrangements. This Recommendation would also have the unintended consequence to prohibit referral fees paid by registered firms and individuals to those for profit and not-for-profit organizations who are outside the scope of the Expert Committee’s mandate, such as university alumni associations or other entities. We do not see the regulatory concern in such referral arrangements, since it is intended that the firm or individual using the title and holding themselves out as financial planners would be regulated. In fact, we believe the Recommendation would have the unintended outcome of fewer consumers gaining access to financial planning services.

Recommendation No. 6 – Titles and Holding Out

As we’ve indicated, we think the Recommendations by the Expert Committee should be limited to the regulation of the use of the title financial planner or equivalent and the express holding out as a financial planner. It is under this narrower mandate that we support the recommendations to ensure consistency in the qualifications, credentials and designations for firms and individuals who use of the title of and hold themselves out as financial planners. We agree that it is not necessary to develop new proficiency requirements, certifications or designations to be met to use the title “financial planner”, and that a list of approved designations or certifications should be developed so that individuals who already hold established credentials do not need to obtain new ones. In our view, the requirements to obtain and maintain CFP or F.Pl. certifications are sufficiently rigorous that they should be on the approved list.

Summary

We appreciate the opportunity to provide you with our comments on the Recommendations.

Please feel free to contact Tim Pryor (tpryor@mackenzieinvestments.com) or Debbie Ammeter (Debbie.Ammeter@investorsgroup.com), if you wish to discuss this further or require additional information.

Yours very truly,

IGM FINANCIAL INC.

Jeffrey R. Carney
President and Chief Executive Officer

cc: Mark Gordon
President & CEO
Mutual Fund Dealers Association of Canada
mgordon@mfda.ca

Andrew Kriegler
President & CEO
Investment Industry Regulatory Association of Canada
akriegler@iiroc.ca

Louis Morisset
Chair, Canadian Securities Administrators and President & CEO,
Autorité des marchés financiers
louis.morisset@lautorite.qc.ca