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  • Writer's pictureAdam Schacter

Understanding the Structure of the Investment Industry in Canada

There have been some recent changes to some of the back-office structures in place.

Credential Securities (a division of Aviso Wealth) was recently absorbed by its parent company – Aviso Wealth – for the purposes of branding and simplicity, which now make it easier to identify 1 company name/brand. As such, Credential Securities (as a name and brand) will be phased out over time to become just Aviso Wealth. No other changes will occur as a result of this.


Also, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) recently merged into one governing regulatory body: the Canadian Investment Regulatory Organization (CIRO).


Due to these recent changes, I thought it might be timely to provide some content and context on how the financial services industry in Canada is structured and regulated, and who the players are.


Understanding the Structure Investment Industry in Canada


Navigating the investment landscape here can be complex, but understanding the key players and their roles can make it easier. In Canada, the investment sector is structured around several critical entities: Investment Dealers, Custodians, Advisors, and Regulatory Bodies like the Canadian Investment Regulatory Organization (CIRO). Local branches also play a vital role in providing personalized service to clients. Additionally, FP Canada sets standards for financial planning professionals, ensuring high-quality financial advice. Here’s an overview to help you understand how these components work together to serve your investment needs.


Investment Dealers

Investment dealers are the backbone of the securities market in Canada, facilitating the buying and selling of various financial instruments such as stocks, bonds, and other securities. These firms operate in both the primary market, where new securities are issued, and the secondary market, where existing securities are traded among investors.

The primary function of investment dealers is to act as intermediaries between buyers and sellers. When you decide to purchase a stock or bond, an investment dealer executes this transaction on your behalf, ensuring that you receive the best possible price.


Additionally, investment dealers play a crucial role in underwriting, which involves assisting companies in raising capital by issuing new securities. This process not only helps businesses grow but also provides investors with new opportunities to diversify their portfolios.


Another significant aspect of investment dealers is their advisory services. Experienced analysts and advisors within these firms offer insights and recommendations based on extensive market research and analysis. This incudes compliance and oversight over their licensed advisors and their client-base. Whether you are a seasoned investor or new to the market, investment dealers can provide valuable advice to help you make informed decisions. Furthermore, they engage in market making, a process that involves providing liquidity to the markets by being ready to buy and sell securities at quoted prices, ensuring smooth and efficient trading operations.


Your Investment Dealer: Designed Securities Ltd.


Custodians

Custodians are specialized financial institutions responsible for holding and safeguarding your financial assets. They ensure that your investments are secure and properly managed, providing a critical layer of protection in the investment process. The role of custodians extends beyond mere safekeeping; they also handle the settlement of transactions, ensuring that trades are completed accurately and efficiently. This involves transferring securities from the seller to the buyer and ensuring that payments are made accordingly.


Moreover, custodians manage corporate actions such as dividend payments, stock splits, and proxy voting. By handling these administrative tasks, custodians ensure that you receive all the benefits associated with your investments without having to manage these details yourself. They also maintain detailed records of all transactions and holdings, providing you with comprehensive reports that can be crucial for tax reporting and financial planning.


The presence of custodians in the investment process adds an extra layer of security and accountability, reassuring investors that their assets are in safe hands. This function is particularly important for institutional investors and high-net-worth individuals who manage large and complex portfolios.


Your custodian: Aviso Wealth.


Investment Advisors

Investment advisors play a pivotal role in helping you achieve your financial goals by providing personalized advice tailored to your specific needs and circumstances. Their services encompass a wide range of activities, starting with financial planning. Advisors work with you to develop a comprehensive financial plan that aligns with your long-term objectives, whether it's saving for retirement, funding your children’s education, or purchasing a home.


One of the core services offered by investment advisors is portfolio management. Based on your risk tolerance, investment horizon, and financial goals, advisors construct and manage a diversified portfolio designed to optimize returns while minimizing risk. They continuously monitor your portfolio and make adjustments as needed to respond to changing market conditions and your evolving financial situation.


In addition to traditional portfolio management, many advisors offer discretionary portfolio management services. In a discretionary portfolio management arrangement, you relegate the day-to-day investment decisions to your advisor. This means that your advisor has the authority to make investment decisions on your behalf without needing to seek your approval for each trade. This service is particularly beneficial for investors who prefer a hands-off approach or lack the time to manage their own investments actively. This relegation of investment decisions also adds a level of accountability, in that your discretionary portfolio manager becomes a legal fiduciary. Your advisor has a duty of care to operate within agreed-upon guidelines and objectives, ensuring that the portfolio remains aligned with your overall financial goals.


Retirement planning is another critical service provided by investment advisors. They help you determine how much you need to save, choose appropriate investment vehicles, and develop strategies to ensure a comfortable retirement. Additionally, advisors offer tax planning advice, helping you structure your investments in a way that minimizes your tax liability and maximizes your after-tax returns.


By working closely with an investment advisor, you can benefit from their expertise and experience, gaining confidence in your financial decisions and strategies.


Your advisor: Adam Schacter


The Role of Branches

A branch is a consortium of advisory practices that all share the same – something; physical location, staff, software, processes, philosophies, investment framework, etc. Branches play a critical role in helping to manage client relationships, offering tailored advice and services based on your unique needs and preferences.


Branches also play a crucial role in compliance and supervision. They ensure that all activities within the branch adhere to regulatory requirements and internal policies, protecting your interests and maintaining the integrity of the investment process. By serving as the frontline for client interactions, branches help build and maintain strong relationships, ensuring that you receive the highest level of service and support.


Your branch: Embark Wealth


CIRO: The Canadian Investment Regulatory Organization

CIRO, the Canadian Investment Regulatory Organization, plays an essential role in maintaining the integrity and efficiency of the investment sector. Formed from the merger of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), CIRO oversees the activities of investment dealers, mutual fund dealers, and their representatives.


One of CIRO’s primary responsibilities is regulation and supervision. By setting and enforcing industry standards, CIRO ensures that firms and individuals operate in a manner that protects investors and promotes fair and transparent markets. CIRO’s regulatory framework covers everything from registration and licensing to compliance and conduct, ensuring that all participants in the investment sector meet stringent qualifications and adhere to ethical practices.


CIRO also plays a critical role in enforcement and disciplinary actions. When firms or individuals violate regulatory requirements, CIRO conducts investigations and takes appropriate disciplinary actions, which can include fines, suspensions, or bans from the industry. This enforcement capability helps maintain investor trust and market integrity.


Investor protection is at the heart of CIRO’s mission. The organization ensures that investment dealers and advisors adhere to high standards of conduct, providing investors with fair treatment and proper disclosure of information. CIRO also monitors trading activities through sophisticated surveillance systems, detecting and preventing market manipulation, insider trading, and other forms of misconduct.


In addition to its regulatory functions, CIRO is involved in policy development, continuously updating regulations to address emerging trends and challenges in the investment industry. CIRO also provides education and training resources to industry participants, ensuring they are well-informed about regulatory requirements and best practices. Furthermore, CIRO has mechanisms in place to handle complaints from investors, offering dispute resolution services to resolve issues in a fair and timely manner.


FP Canada: Setting Standards for Financial Planning

FP Canada is a national professional body dedicated to fostering better financial health for Canadians by certifying professional financial planners and setting high standards for financial planning. FP Canada ensures that financial planners meet rigorous education, examination, experience, and ethics requirements, promoting confidence in the financial planning profession.


The organization offers two key certifications: the Certified Financial Planner (CFP) designation and the Qualified Associate Financial Planner (QAFP) designation. These designations signal that a planner has met comprehensive standards and is committed to ongoing professional development.


FP Canada’s role extends to enforcing ethical standards through its FP Canada Standards Council. This council establishes rules of conduct, practice standards, and competency profiles for financial planners, ensuring that they act in the best interests of their clients. The council also investigates and disciplines planners who fail to meet these standards, safeguarding the public trust in the profession.


Furthermore, FP Canada is involved in public education, providing resources to help Canadians make informed financial decisions. This includes offering tools and information on financial planning topics such as budgeting, retirement planning, and investment strategies.


By upholding high standards and providing robust certification programs, FP Canada plays a crucial role in ensuring that financial planners in Canada are well-equipped to help you achieve your financial goals. Working with a certified planner gives you the assurance that you are receiving advice from a professional who adheres to rigorous standards of education, practice, and ethics.


Canadian Investor Protection Fund: Safegurading Assets for Clients

The Canadian Investor Protection Fund (CIPF) is a cornerstone of the Canadian financial system, ensuring investors are safeguarded in the event of a member firm's insolvency. It offers protection for clients' property, including cash and securities, up to $1M per account type. This assurance of coverage helps maintain investor confidence, encouraging broader participation in the financial markets by mitigating the fear of loss due to broker-dealer failure.


CIPF coverage is available to clients of firms that are members of the Canadian Investment Regulatory Organization (CIRO), formerly IIROC. These firms are regulated to uphold high standards of solvency and client asset protection. In the unfortunate event of a member firm's insolvency, clients can file claims with CIPF to recover their assets, subject to verification and coverage limits. This process ensures that investors' assets are protected and recoverable to the extent possible, thereby reinforcing trust in the financial system.


Beyond providing financial protection, CIPF also focuses on investor education, enhancing transparency about the protection it offers. By clearly communicating coverage limits and the claims process, CIPF helps investors understand their rights and make informed decisions. This educational role, combined with its protective functions, contributes significantly to the stability and integrity of Canada's financial markets.



The Canadian investment sector is designed to ensure a well-regulated, efficient, and client-focused environment. Investment dealers, custodians, advisors, and branches work together to serve your financial needs, all under the vigilant oversight of CIRO.


Additionally, FP Canada sets high standards for financial planning professionals, ensuring that you receive quality advice from certified planners.


By understanding the roles of these key players, you can better navigate the investment landscape and make decisions that align with your financial goals. Whether you are planning for retirement, looking to grow your wealth, or seeking tax-efficient strategies, knowing how these components interact will help you achieve your financial objectives with confidence. This integrated approach ensures that you have access to the expertise, security, and support needed to succeed in your investment journey.


I hope you find this both interesting and informative in keeping pace with today's financial world.

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