"Very hard to trust financial advisors though. I left an advisor last year who specialized in SRI, but didn't seem terribly responsible when it came to managing my money." email from reader Audrey (with permission, thanks!)
A few days ago, author and independent (as in non-industry tied) investor Gail Bebee sent me her press release opinion piece Five Crucial Facts the Mutual Fund Industry is Not Telling Investors on some improvements that still could be made to mutual fund disclosure. While I agree with her points and might add some myself, most notably showing a standardized example of net returns after costs and fees as they do in the UK (e.g. page 7 of this Scottish Widows Key Features document for one of their funds), I'd hate to see the Canadian update to disclosure delayed given the unconscionable ten years it has taken to get as far as the draft buried (it took me about 15 minutes of Googling to find a link in Mondaq) in Appendix A of the CSA Staff Notice 81-319 on the OSC website.
But the real issue with disclosure is that, as the UK regulators discovered after studying the situation following years of having new improved simplified documents, "Research suggests the quality of KFDs (Key Features Document) varies considerably from firm to firm and that many KFDs are either not read or are not understood. Instead consumers often rely on an adviser to explain the product." (FSA Good and Poor Practices in Key Features Documents, p.7) The people who bother to actually read them are likely investing nuts like me, who are willing, indeed prefer, to wade through a Prospectus, while those who have neither the time, interest or skills and thus really need to read a simplified disclosure, don't bother to read it.
Which brings me to Audrey's quote and a much more critical problem that doesn't seem to be getting action - financial advisors need to become more trustworthy. Advisors need to become legally liable for a fiduciary duty and regulators need to go after advisors who transgress. As IndependentInvestor.info's Marc Ryan dissected so well recently, the proposed new federal securities regulator fails to address this matter amongst its other investor protection failings.