Canadian Treasurer

July 9, 2014

Small and medium-sized financial advisory businesses make strong contributions

Toronto, ON – Small and medium-sized businesses (SMBs) providing financial advice in  Canada are important contributors to the economy and the financial health of the population, says ‘ Sound Advice: Insights into  Canada's Financial Advice Industry’, a study by PwC. However, the study also shows that these benefits could be eroded if regulatory proposals currently being considered by the Canadian Securities Administrators are adopted.

The report highlights the significant economic contributions of the Canadian SMB financial advice sector which directly employs 182,000 people and contributes  $19 billion to GDP. When indirect spin-off benefits are factored in, the sector accounts for 1.4 per cent of Canadian GDP and 1.5 per cent of total Canadian employment.  

Approximately 80,000 SMB financial advisors in this segment are well-positioned to provide comprehensive and accessible financial advice to the Canadian mass market of 12 million households. Most of these advisors are dual licensed, able to sell securities, mutual funds and/or life insurance, and provide a range of services including investment, tax, risk management, retirement and estate planning.

"The SMB financial advisors play a unique role in the financial advice industry by virtue of the range of products and services they provide, the consumers they serve, and the value they provide those consumers," says  Davis Yoo, co-author of the report and senior advisor at PwC.

The mass market makes up a key base for SMB advisors, as a large number of SMB financial advisors' clients are among the 80 per cent of Canadian households that have less than  $100,000 in financial assets. These are often the families and individuals most in need of financial advice, and the vast majority of clients pay for their financial advice through sales commissions, rather than by fee-for-service. Having access to financial advice helps Canadians accumulate more wealth long-term and allows for better financial literacy and retirement readiness.

Byren Innes , senior strategic advisor at PwC and co-author, adds: "Financial advisors do more than provide short-term financial planning advice. They engage in a long-term relationship with clients to help Canadians accumulate greater wealth and pave the way for better saving strategies and retirement planning."

However, the study warns that any measures designed to improve investor protection must be balanced with the need to ensure continued access to financial advice for the mass market.

Similar reforms implemented in the UK and  Australia – particularly banning sales commissions and requiring advisors to have fee-for-service arrangements with their clients – have led to an increase in costs for financial advice, putting it out of the reach of many low and middle-income individuals. As well, the reforms have resulted in a large per centage of advisors leaving the business (an estimated 25 per cent in the UK).

"We need a system that serves investors at all income levels," says  Greg Pollock, president and CEO of Advocis, The Financial Advisors Association of  Canada. "Given Canadians' concerns around cost of living and retirement readiness, it's critical that more people – not fewer – are able to seek professional financial advice."

The study concludes that regulatory reform must recognize the important role that SMB advisors play in their clients' financial needs and the Canadian economy as a whole.

Visit for the full report and for the report executive summary, fact sheets, and infographic.



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