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The regulatory framework in Canada tends to be more complex than in the UK, given that individual provinces have autonomy about factors such as consumer protection legislation. A mixture of federal and provincial standards can be difficult to comprehend, posing a challenge for expatriates needing the assurance that their financial matters are in good hands.

Here our Ontario team runs through some of the most important differences to be aware of, and why it matters.

Understanding Canadian Financial Legislation

One of the first things to note is that, while an adviser needs to be appropriately licensed to advise about buying or selling stocks, insurance or a mutual fund, that requirement does not always extend to offering general financial advice.

Just this month, the Financial Services Regulatory Authority of Ontario announced new rules, as reported by Global News:

  • Service providers calling themselves financial planners or advisers must be registered with an authorised professional body.
  • Businesses have to be subject to disciplinary and complaints processes.
  • Anybody using such a title will need to meet minimum education standards and comply with code of conduct standards.

The importance of this is that, until March 2022, no such provisions have been enforced in the province, and the proposal has been pending since the 2019 budget. New standards will come into effect from 28th March but are being phased in. For example, financial planners have four years to become compliant.

Many foreign nationals living overseas assume similar rules exist to those in the UK and make significant decisions based on advice that may not be subject to any regulation. Hence, the need to comprehend where the standards are different and what that means for your wealth management options.

Buying a Property in Canada

The next area to look at is mortgage borrowing or any financial product related to buying a residential home or investing in property.

Again, rules vary between provinces – although, in some regions, including Nova Scotia, British Columbia and Ontario, any lender (or individual) offering a loan secured by a property is subject to local statutes. Most, but not all, provinces strictly regulate mortgage brokers, but there are exemptions.

Banks, locally licensed insurers, credit unions and loan and trust organisations are not subject to mortgage broker laws in Ontario if they deal with mortgage products connected to securitisation (when the debt has been repaid in full). If you’re looking for reliable advice from an experienced wealth management adviser, it’s advisable to check their accreditations carefully and ask about the relevant regulations they are compliant with.

The mortgage system itself is often unfamiliar:

  • Standard UK mortgages run for 25 to 30 years, but in Canada, they are usually only five-year terms, amortised over a 25-year average.
  • Property owners must refinance their products every five years, potentially experiencing an increased interest rate.
  • Prepayment penalties are steep, making it financially unviable to repay a property loan early or avoid higher interest costs.

One of the advantages for Canadian residents is that mortgages in the country are portable, so if you move home during the five-year term, you can apply your existing mortgage to the new property, with an additional loan for the excess if the value is higher.

Mortgage interest is not tax-deductible, so your advice from a tax-efficiency perspective may be somewhat different than in the UK.

Canadian Investment Regulations

Many expatriates need to make decisions about pension wealth, investment assets and savings, with numerous factors influencing the best course of action. Our guide to the Tax Implications of Transferring a UK Pension to Canada is a valuable resource if you’d like to learn more about transfer taxation and balancing the risks and rewards of varying pension structures.

In terms of the regulatory framework, things work differently in this area, too, since the provinces and territorial regulators are in charge of administering and enforcing rules around investor intermediary regulation and transactions involving securities.

An additional two self-regulatory organisations monitor standards and business conduct to protect investor’s interests:

  • The Investment Industry Regulatory Organisation of Canada (IIROC) sets rules for equity markets and investment brokers, including training courses and enforcing regulations.
  • The Mutual Fund Dealers Association (MFDA) is responsible for regulatory operations, business conduct and practice standards or mutual fund deals.

Foreign nationals relocating to Quebec may also need to know that the Montreal Exchange is categorised as a self-regulatory organisation, the only financial derivatives exchange available.

The Benefits of Understanding Overseas Financial Advice Standards

Regulation is imperative to ensure consumers aren’t given inappropriate advice or purchase financial products such as insurance policies without safeguards against mis-selling or unethical practises.

Some of the most common financial mistakes expatriates make include:

  • Neglecting insurance or having an insurance product that doesn’t cover them against key risks – uninsured health treatments abroad can run into substantial costs.
  • A lack of knowledge around inheritance laws often dictates how your assets are distributed unless you have put an effective strategy beforehand.
  • Filing incorrect tax declarations or not accounting correctly for double taxation.

These errors can be extremely costly, but easily avoided with competent financial advice, adherent to the most robust regulations around professionalism, consumer protection and transparency.

Why is it worth knowing which regulations apply and which organisation is responsible? The network of provincials and federal regulators can be difficult to navigate. Still, if you are conscious of the consumer protections in place, and the appropriate regulators, it becomes easier to select a financial adviser with the proper authorisations and registrations.

Choosing the Right Financial Advisers in Canada

Chase Buchanan Wealth Management has a strong presence in key locations globally, with our Ontario team working alongside advisers in the United States and across Europe. As a specialist financial advisory and wealth management service, we work with foreign nationals and expatriates worldwide, providing clear advice, long-term strategic recommendations and holistic support for achieving your financial aspirations.

If you’d like further information about how the financial systems and regulations work in Canada, please visit our Expat Pension Planning Advice for Retirement in Canada as a first step to understanding some of the crucial considerations during an international relocation. You are also welcome to contact our Ontario office at your convenience or get in touch with the Chase Buchanan UK Administration Centre to arrange a good time to talk.