“While online do-it-yourself channels have entered Canada’s financial services ecosystem, advisors remain an essential bridge between financial complexity and real-life inclusion, especially for modest-income families who are most at risk of being underserved,” Edwards, said in a release.
Just over half of advised investors (53%) have less than $100,000 in assets, according to research commissioned by the Ontario Securities Commission in 2022. Those with less than $50,000 in assets were more likely to report receiving no education on financial planning concepts from their advisor.
At the same time, participation in registered savings accounts, like the RRSP and TFSA, is lower among Canadians with less income, according to Statistics Canada data from 2022.
This reflects limited disposable income and a lack of guidance on how best to use these programs. “While advice may be available, it is not reaching Canadians in an equitable or consistent way,” Edwards wrote. “The decline in advised engagement may not be due to a lack of interest in financial guidance, but rather the absence of affordable, accessible models that align with their financial realities.”
To widen access to financial advice for Canadians with the greatest needs, and support business models capable of delivering it, regulators need to cull unnecessary rules, Edwards argued.
Compliance and regulatory documentation has grown more lengthy over the past two decades, signalling a layering of obligations and a gradual increase in financial costs on smaller firms, which diverts resources from client service, Edwards wrote. The benefit of new regulatory requirements should be validated through a quantitative impact assessment, he said.
While regulation must address emerging risks, it must also meet thresholds of necessity, proportionality and evidence-based justification, he wrote. Edwards calls this balance “proactive, but not excessive; protective, but not exclusionary.”
He noted that regulatory reforms in Australia and the U.K. on disclosing possible conflicts of interest and advisor remuneration transparency led to advisors leaving smaller investors behind. “While disclosures did become clearer, compliance costs soared and many advisors, especially those serving smaller accounts, left the market,” he wrote.
In Canada, there is a decline in financial advice engagement among modest- and middle-income households. The drop in the number of investors working with a financial advisor was particularly steep among those under 45 and with portfolios of under $100,000, according to the Canadian Securities Administrators Investor Index in 2024.
To reverse the trend, Edwards called for two actions: reducing the cumulative regulatory burden by using a cost-benefit analysis on existing rules to determine which rules need streamlining, and restructuring the regulation-making process.
New regulation should address a specific issue and be backed by evidence of harm, not just a perceived potential of harm, Edwards said. “This does not mean that regulatory action must wait until harm occurs. Rather, it means that anticipated risks should be substantiated by research, informed by international experience and weighed carefully against potential trade-offs,” he wrote.
Promoting the alignment of provincial regulatory actions, such as through the Canadian Securities Administrators’ passport system, would enable provincial regulators to retain their local mandates while having flexibility to recognize equivalent standards elsewhere, cutting duplication and compliance costs.
“Considerations must include whether regulatory proposals may limit access, reduce inclusion or impose opportunity costs,” Edwards added.