A New SRO Landscape in Canadian Wealth Management

Dec 19, 2022 | Advisory Solutions, Uncategorized, Wealth management trends

Nearing the end of 2022 means we’re getting closer to the starting line of a new self-regulatory organization (SRO).

On Jan. 1, 2023, the merger between the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) will launch.

As with any merger, it takes time to integrate rules, functions, policies, etc., so we don’t expect to see significant regulatory changes out of the gate from the new SRO. But we have been taking stock of potential viable shifts that could occur down the road and subsequently impact how advisors and their firms earn revenue, the investments they sell, how advisors are licensed, and how dealers build their product platforms. These questions will be topics of future articles, but, in the meantime, we’ll close the year with a high-level summary of what might be at stake under a new SRO.

Is Writing on the Wall?

The current MFDA and IIROC platforms offer distinct advantages to advisors who choose to be licensed through one of these channels. For example, the MFDA allows licensed advisors to hold off-book client assets and to incorporate their businesses. In addition, MFDA firms generally offer better grid structures to advisors than IIROC firms, but there are trade-offs to these schedules (technology support being one). IIROC, on the other hand, allows licensed advisors to run discretionary and fee-based businesses. IIROC firms also tend to have strong brand recognition and bigger budgets to support their salesforce. The questions on our minds, and surely yours, is whether these advantages change under the tapestry of a new SRO. Here’s a speed-run look at some considerations.

In the new year, we’ll delve into the above topics as the new SRO comes into clearer focus. We’ll also look at some opportunities and challenges facing advisors and their firms. Today’s takeaway is the firms that prepare for potential changes ahead will likely be in a better position to compete under a new SRO landscape.