The Social Investment Organization is calling on the Investment Dealers Association to implement new rules that would make it mandatory for advisors to ask their clients about their social and environmental concerns on opening new accounts, and account reviews.

The rules are a response to a long-standing concern in the socially responsible investment industry that advisors are not dealing with significant areas of client interest on the social and environmental aspects of their investments.

As such, the industry believes there is a huge gap between what Canadians would like to see from their investments, and what they are offered when their accounts are opened and viewed.

The SIO called for the new rules in a brief to the IDA April 24 in response to its request for comment on its proposed new client relationship model, a series of disclosures that would form the basis of the relationship between clients and advisors under IDA jurisdiction.  The SIO said it would send a similar brief to the Mutual Fund Dealers Association, when the MFDA releases its proposed client relationship model sometime in the future.

"We believe that the demand for socially responsible investment by the investing public is much larger than is reflected in current assets, and this gap between potential demand and current assets is the result of an outdated model of client relationship based solely on financial considerations, " states the brief.

"We believe that the majority of Canadians are demanding investments that take into consideration non-financial impacts, as well as traditional parameters of risk and return.  Yet the mainstream of the financial industry in Canada has failed to come to grips with this reality, with the effect that Canadians are being poorly served by their investment sector.  This is an example of market failure, a key component of which is the failure of most financial advisors in Canada to delve into the attitudes of their clients on this issue."

The brief points to regulations for advisors in Australia, who are mandated to make inquires into their "client's attitude to environmental, social or ethical considerations."

In its recommendations, SIO calls on IDA to mandate advisor inquires into environmental, social and governance considerations, and that these should be a part of the Know Your Client policies used by advisors to determine the suitability of particular investments for clients.

For more information on the IDA client relationship model, and SIO's response, visit:

http://ida.knotia.ca/Knowledge/View/Document.cfm?Ktype=445&linkType=toc&dbID=200803361&tocID=22&nc=341786822342

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