The federal government needs to take action to help independent financial services firms compete against the increasingly dominant big banks in Canada as well as to improve consumer protection, Independent Financial Brokers of Canada (IFB) argues in a recent submission to the federal Department of Finance Canada.

Notably, the IFB expresses its support for the government's intention to consider proportionality in the development of policy and regulation in its submission to Finance Canada on the department's review of the federal financial services sector framework.

The financial services sector's growing regulatory responsibilities are placing smaller businesses at a competitive disadvantage to their larger counterparts, the IFB argues in its submission.

"IFB members must compete with large, vertically integrated financial institutions — like banks and insurance companies — for clients," the submission says. "However, today, the increasing regulatory burden and dominance of large financial institutions is reducing the ability of independent firms to remain competitive."

The growing costs and efforts associated with compliance, the IFB's submission states, are taking away from the amount of time and resources that independent advisors can devote to their clients.

The increasing dominance of the big banks, in general, also poses a challenge for small, independent players in the financial services sector — as well as jeopardizing consumer protection, the IFB suggests in its submission.

"Today, we have a financial services landscape increasingly dominated by six large banks," the IFB's submission states. "This domination extends to all aspects of the financial services industry — banking, securities, even insurance — while delivering services to consumers that, at best, have been shown to lack transparency."

For example, in the securities dealer space, the IFB notes that the presence of the banks has led to a drastic decline in the number of independent firms. Furthermore, the IFB suggests that it's often not clear to consumers whether they're dealing with a bank branch or a representative of the bank's securities arm.

Also "troubling," according to IFB, have been recent cases involving the banks in which clients have been overcharged over the course of many years, leading to "no-contest" settlements with the Ontario Securities Commission.

The review of the financial sector framework, currently underway at Finance Canada, represents an opportunity for the government to strengthen consumer protection, the IFB says.

"Canada's lack of a statutory financial consumer protection policy, in comparison to some other countries," the IFB's submission concludes, "has been cited as a fundamental weakness in oversight."

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