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The Investor Advisory Panel (IAP), an independent committee established by the Ontario Securities Commission (OSC), released a report on the risk profiling roundtable that it jointly organized with the OSC Investor Office on September 28, 2016. The roundtable was held to explore the findings of the IAP’s research report on the risk profiling used in the retail investment advice process and provide recommendations on possible next steps to improve risk profiling.
Risk profiling is a complex, multi-dimensional process that combines many factors, both subjective and objective, to create a “risk profile” – an overall assessment of the most appropriate level of risk for an investor. In 2015, the IAP published its risk profiling research report, Current Practices for Risk Profiling in Canada and Review of Global Best Practices, which was prepared by PlanPlus Inc. The research report includes an academic literature review; a regulatory review that included Canadian and international regulators; a review of current solution providers; and a review and analysis of current practices in Canada.
Roundtable participants included investor advocates, financial services industry members, government and regulatory representatives, and academics. Members of the research report team – PlanPlus Inc. President and CEO Shawn Brayman; Ellen Bessner of Babin Bessner Spry LLP; and Dr. John Grable of the University of Georgia – attended the roundtable and participated in a panel discussion moderated by independent facilitator Scott Ferguson.
The roundtable sought input regarding the major themes of the research report, including:
- the appropriate scope of risk profiling;
- the tools and technologies to support risk profiling and their appropriate uses;
- the appropriate process for high quality risk profiling; and
- how to achieve successful change in risk profiling scope, tools, technology and process.
While the event was designed to obtain stakeholder input rather than build a consensus among participants, considerable common ground emerged from the roundtable dialogue. There was general support among participants that:
- stakeholders should work together to develop a holistic response to the challenges they face rather than use traditional siloed solutions developed according to segments of the sector or types of investments;
- it is critically important to consider the need for and develop all constituent groups’ understanding of, and buy-in for, the types of improvements that are needed: in this regard, a significant pipeline for successful change is education;
- part of the challenge is to change the mindsets regarding the risk profiling process. Risk profiling should be viewed as a foundational element of the optimal relationship between the client and advisor; and
- more cross-sector conversations like the roundtable would be helpful.