The issue of how much advice online brokers can give do-it-yourself investors came to the fore during the GameStop saga in 2021.NICK ZIEMINSKI/Reuters
During the GameStop Corp. GME-N short squeeze in early 2021, Wealthsimple Inc. saw a rush of clients open accounts on its then-new self-directed investing platform to purchase the meme stock.
Wealthsimple was hamstrung: guidance for order execution only (OEO) dealers prevents them from sharing investing information that constitutes a recommendation, as self-directed investing clients haven’t undergone a suitability assessment. So, the online broker couldn’t address the meme stock directly.
But Wealthsimple didn’t want to leave clients entirely to their own devices, says Blair Wiley, the company’s chief legal officer. It set specific criteria for what constituted volatility, and added warnings to the landing pages for various stocks that had seen significant swings in the past 30 days.
“We felt at the time that was pushing the boundaries of the current OEO guidance, but it was something that was well warranted because it was going to help our investors become more informed,” Mr. Wiley says.
The guidance around advice in the OEO channel may soon change. The Canadian Investment Regulatory Organization (CIRO) is looking at allowing dealers to provide non-tailored advice to clients – such as investor risk profile assessments, model portfolios, risk warnings for more complex assets, and alerts around volatility – to address the growth and evolution of the do-it-yourself investment landscape.
The regulator’s consultation closed in late February. Updating the guidance is among its priorities for the 2026 fiscal year.
Do-it-yourself investing is booming: 45 per cent of all investors now have a DIY account, according to the Canadian Securities Administrators’ 2024 investor index survey. But these investors skew younger and less well off.
FAIR Canada research found the largest demographic of DIY-only investors is people who are 35 years of age and younger, and 60 per cent make less than $100,000 per year. At the same time, they’re also relying heavily on “non-traditional” sources of information, CIRO said in the consultation document, including family, friends and social media finfluencers.
An Ontario Securities Commission study earlier this year found more than one-third of investors surveyed made a financial decision based on advice from a finfluencer, making them “vulnerable to low-quality advice” and more likely to fall victim to social-media scams.
James Sinclair, chair of the Ontario Securities Commission’s investor advisory panel, is in favour of allowing OEO dealers to offer non-tailored advice.
“The problem is, in a world where fewer people are accessing the advice-based channels and getting their information from family [or] social media finfluencers … this is a way that there could be pretty decent information [for them] that isn’t tailored, that helps people make good decisions,” he says.
Different interpretations
CIRO acknowledged in its request for comments that dealers have been split on their interpretation of its current guidance. Some firms feel they can provide informative communications and tools to investors, while others have been more cautious out of concern that any educational information could be construed as a recommendation.
“We’ve always had a more prudent approach,” says Claude-Frédéric Robert, president of National Bank Direct Brokerage.
“What we are looking for is clarity – we want to make sure there is no room for interpretation,” he adds.
Since the pandemic, the average age of clients opening accounts with NBDB is 10 years younger than the average age of clients before that time, he says.
Tanya Woods, head of government and regulatory affairs at Questrade Inc., says the company has chosen not to experiment and welcomed CIRO’s consultation. “We are very much seeing a shift in demand from consumers,” she says. “We don’t want to ignore that, but we’re incredibly committed to compliance with our regulators.”
Mr. Wiley says Wealthsimple has been more “pragmatic.” In addition to its volatility indicator, it has rolled out a model portfolio framework to help clients construct a portfolio that “meets their objectives, their interests, when it comes to industries or their time horizon.”
CIRO’s consultation asked for feedback on whether dealers should be allowed or required to send alerts to clients, and what scenarios might merit alerts, as well as the types of self-help tools that might benefit clients without straying into the realm of recommendation. It also delved into questions around partnerships between dealers and finfluencers, and the possibility of allowing copy-trade functions.
Most wealth management firms said in their responses that they hoped to see the regulator take a principles-based approach to educational tools for clients, which would give dealers more flexibility, rather than prescribing options.
However, comments on the use of alerts were more mixed. The Canadian Bankers Association wrote in its submission that encouraging or creating an expectation that dealers issue alerts or proactive information could “expose dealers to unreasonable litigation risk and potential civil liability … based on allegations of failure to warn, or warning when unwarranted.”
Mr. Robert calls alerts a slippery slope. “Over the past few months, we’ve been in a very volatile environment, and the inherent risk of securities you purchase could change at any given time.”
GameStop, for example, was a straightforward stock with an easily understood underlying risk profile before the short squeeze, when “that all changed,” he says.
Questrade suggested a range of opportunities for alerts, such as significant price movements, news or analyst rating changes in a security a client holds, as well as proactive delivery of educational content.
Ms. Woods says the alerts speak to a broader question about whether information is “pushed” to investors or whether investors “pull” it toward themselves. In the past, the former was regarded as closer to a recommendation, but she sees the dichotomy as outdated.
“To make an informed decision, it doesn’t matter if it’s pushed or pulled – it matters what information you’re receiving: objective, publicly available information that, if I knew where to find it, I would want to go look there first,” she says.
