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Wealth Professional | 27 Apr 2015, 09:38 AM Agree 0
The industry is kidding itself, says a seasoned veteran laying out a passionate case against 5 per cent upfront.
  • Richard Pieprzak | 27 Apr 2015, 10:37 AM Agree 0
    I am interested in knowing how this fellow was compensated as a new mutual funds advisor 34 years ago.
  • Kevin | 27 Apr 2015, 10:45 AM Agree 0
    I guess we should also start having disclosure when the banks and insurance companies lock clients money up in 5 year non redeemable GIC's . How is this different than DSC . At least the client can cash in the investment if need be with a fee and also have access to free units 10% in DSC funds.
  • Next Generation | 27 Apr 2015, 11:31 AM Agree 0
    Ross - have you ever in your career sold a mutual fund or segregated fund on a DSC or Low-Load basis?
  • Robert Roby | 27 Apr 2015, 11:44 AM Agree 0
    I agree with the premise of a 5 percent DSC fee but being criminal is somewhat harsh.
    Pricing of services is only an issue in the absence of value. Therefore integrity pricing is based on the advisors tenure, services, education and licensing. I believe that investors are best served by independent advisors , free of proprietary products. In addition, an advisor who provides an array of investments including individual blue chip stocks, eft,s,well selected mutual funds coupled with exceptional services provides far more value than one who only has mutual funds to offer. Therefore what is fair to,the client is based on integrity pricing for value received. A 2000 per year client fee comes out to about $2.00 per hour.

  • Will Ashworth | 27 Apr 2015, 11:59 AM Agree 0
    Hi Robert. Thanks for the comment.
    I meant to take out the "nothing short of criminal" part when editing but somehow it was published.
    I've changed the first paragraph because it is too harsh.
    Thanks for your comments.
  • Will Ashworth | 27 Apr 2015, 12:05 PM Agree 0
    Next Generation.
    In Ross' defence I left out the fact that he too has sold DSC funds (a long time ago) because of space constraints for the article.
    He by no means is trying to paint himself as lily white.
    If I gave that impression it wasn't my intention.
    Thanks for the comments.
  • Will Ashworth | 27 Apr 2015, 12:10 PM Agree 0
    Richard, I don't believe Ross Birney's compensation 34 years ago has any relevance today.
    Are we not allowed to change our views on a subject?
    Thanks for commenting.
  • Tim Affolter | 27 Apr 2015, 12:17 PM Agree 0
    Is the DSC structure really so sinister? It actually still makes sense when you consider the historical context in which the DSC structure was created, and the objective we are trying to achieve.

    To be clear, we no longer use DSC funds in our firm. That being said, I take umbrage with the self-righteous tone in Birney's response, and with the multitude of "fee based" advisors using FE funds with a 1% trailer fee. Some actually claim that it is not a commission. Seriously?

    When you are rewarded for selling a client a particular asset (mutual funds) or keeping their money in a particular account (wrap programs), that is a commission, plain and simple.

    When you are ambivalent whether your client keeps their assets under your administration or another advisor's, or in an apartment block, for that matter, THEN you are not receiving a commission.

    Surely Birney and the FE evangelists know that the MER paid by a client is identical both with the FE and DSC versions of a fund? The client does not "pay the DSC commission," as their annual fees are exactly the same, whether their representative is selling them a DSC or FE fund.

    Most advisors are not old enough to remember this, but the DSC structure was originally developed to SAVE the client money. It addressed the issue of high front-end loads, to which Birney refers. The DSC "commission" is actually an advance on the 1% trailer fee. It is paid by the fund company in year one and recovered by cutting the trailer fee in half for the DSC period. Originally, that was ten years: 1/2% x 10 years = 5% advance. This is why the DSC fee declines as the deposit ages; each year the company recovers a portion of the advance it made to the selling rep.

    We all know that time required in the first year of a relationship is significantly greater than in subsequent years. Exploring the client's situation, discovering values, learning objectives, creating a base-line financial plan, and carefully measuring the impact of suggested strategies and alternative scenarios, all takes tremendous amounts of time. For smaller clients, the DSC structure can actually keep the client from having to pay additional planning fees for this work. In return, they commit to keeping their funds with one company for 7 years. For most, it is also preferable to paying a front-end load, which reduces the client's deposit.

    Many clients consider the "lock-in" a fair trade-off to paying fees for the extra work in the first year. And remember, the funds aren't truly locked-in like a non-redeemable 5-year GIC, which people often line up at bank teller windows to buy. Yet, we don't hear anyone claiming that selling a GIC is heinous, do we?

    Let's move on in this debate, shall we? The real issue is, "How do we, as an industry, provide quality, affordable financial advice, which is desperately needed by all Canadians, young and old, rich and poor, while ensuring professional objectivity, accountable client engagement, AND transparent, fair, sustainable compensation?"

    It has to work for the people on both sides of the table, and each client relationship is different. Therefore, as the debate over fee structures rages on, I think we may need to realize that we are going to need multiple compensation models, from which clients must be given the opportunity to CHOOSE. They should neither be coerced into an opaque model by clever sales tactics NOR forced into another by well-meaning regulators and consumer advocates.
  • Next Generation | 27 Apr 2015, 12:19 PM Agree 0
    Thanks for your response Will. So essentially then what Ross is saying is that by using DSC funds in the past, he is was receiving unfair compensation based on the last line of the article. In my opinion it is highly hypocritical to stand up on a soap box at this point in his career condemning DSC when in actual fact he has used this compensation method in the past.
  • Ross Birney | 27 Apr 2015, 01:23 PM Agree 0
    To Next Generation (whoever you are) - I used to smoke 40 years ago and then quit when I became more aware of its undeniable link to causing cancer. Does that make me a hypocrite for telling people not to smoke today?

  • Robert Roby | 27 Apr 2015, 01:24 PM Agree 0
    What occurred inthe past is irrelevant to the realities of today. I welcome the fact that some advisors will have to re-look at the value they provide. Unfortunately the actions of a few paints us all with the same brush. Crm2 will allow the client to determine the value and at the end of the day that is what matters. Quibbling about gic,s etc is a waste of time.
  • Tim Affolter | 27 Apr 2015, 02:49 PM Agree 0
    Robert, history is never irrelevant. It is, in fact, what makes the difference between evolution and chaos. To quote Bernard Lewis, respected historian:
    "History is the memory of our society... Without memory, one is amnesiac; with distorted memory, one is neurotic."

    Without referencing the history of compensation in our industry, which has evolved in response to market competition and expanding advice, we run the risk of making knee-jerk decisions based on paranoia (neurosis) which fail to consider all of the needs of those we serve.

    "The past informs the present," hopefully preventing us from both repeating past mistakes and discarding proven value from past successes, all in the name of change.
  • Mark Matsumoto | 28 Apr 2015, 09:19 AM Agree 0
    It is easy for established advisors to say that DSC should be banned. Have they forgotten what it is like to try to start in the business? Look at the uproar over having to change trailers to fees.
    This industry needs many more independent advisors. Banning DSC is an attack on the people trying to start up. I think we should leave things as they are.
  • Ross Birney | 28 Apr 2015, 11:52 AM Agree 0
    Mark, if you believe that your right to compensation is more important than a client's right to fair treatment then you're starting off on the wrong foot and should probably pick another line of work.

    If you want to be successful in this business the first thing you need to do is lose the "entitlement" attitude.

    You can sell stocks, ETFs, Bonds, closed-end funds, options, IPOs and a myriad of other investment alternatives, even mutual funds, and earn a fair compensation by doing so. All of these pay a fair commission, are fully transparent and don't penalize your clients by locking them in for 5 years or more.

    Banning DSC sales would not be an attack on independent advisors, in fact it may arguably be the opposite. And it certainly would not be an attack on people starting up.

    Yes, we need more independent, fully licensed advisors. And we certainly need fewer salespersons and more advisors willing to be honest, forthright and up-front with their clients.

    What we definitely don't need are more reasons for clients to mistrust their advisors.
  • Mike Travers | 30 Apr 2015, 01:21 PM Agree 0
    ‎Ross, I think what you've done in the past and what you do today illustrates your perspective, or lack thereof. The fact of the matter is that new advisors need DSC to remain in the business and is something you have likely forgotten along the way or is a matter you were fortunate not to have dealt with. Attracting and retaining new clients is something our industry especially needs. What is the attrition rate? I heard when I began, 10yrs ago, that 85% of advisors were out of the business within 5yrs. Not sure if that is an accurate number but even if close, is something to consider when talking about compensation.

    Your point on smoking would maybe be relevant if harmful affects of Canadians being in DSC mutual funds was even a fraction that of smoking!

    If the DSC structure is explained to the client, both for how it works and ‎its need for client asset size in helping to keep advisors in business, there should be no reason to limit their application.

    Wh‎en you think about what you're suggesting, doesn't it run contrary to the investing work you work within? Against capitalism?

    Is not helping to keep their advisor in business not in their best interest, Ross? No? Ok then, would having a limited supply of advisors to choose from be in their best interest? What someone gains on flexibility they'll lose on cost given basic supply and demand.‎

    But really, why does it work so against the clients best interest to be locked into a specific mutual fund company??

    I think this is all just your limited perspective Ross and is a view not necessarily shared by all Canadians.  ‎
  • Ross Birney | 30 Apr 2015, 03:07 PM Agree 0
    Mike, I'm saddened by your comments. I truly hope that such self-serving sentiments are not shared by the majority of advisors.

    I believe the attrition rates you cite are reasonable, but suggest that the better you treat your clients, the more respect you show them, the more professional you are, and the more you are deserving of their trust, the greater your likelihood of success will be.

    If you believe the only way to be "successful" is by tricking your clients into buying mutual funds on a DSC basis I can assure you that you're wrong.

    If you believe you are entitled to penalize your clients and place your interests above theirs, solely to keep you in business then I would be very concerned about the day your clients find out that they can get the same products at a far lower cost, and be treated fairly and with respect, elsewhere.

    And there are a lot of us out there offering a fair deal for fair costs, and sooner or later your clients will run into one of us, or one of our clients.

    Given your comments and closed-minded point of view, there is no advice I can offer to help you other than to suggest you at least upgrade your licensing so that you can offer your clients more than just mutual funds.

    A very wise man once said, "For those who understand, no explanation is needed. For those who do not, there is no explanation possible."

    I wish you the best of luck in your career, you're going to need it.
  • Mike Travers | 30 Apr 2015, 08:12 PM Agree 0
    Ross, I think you need to reread my post. By explaining how it works (what the dealer/advisor receives and 7yr schedule) and explaining why it's being applied (to cover minimum charges to run a business), how is the client being tricked??
    You made reference to getting the same product at lower cost – assuming you’re talking about DSC and FE, where’s the cost difference to clients with a long-term time horizon?
    And how is limiting the product line being closed minded? Totally opposite Ross! Saying there is no place for DSC funds is FAR more closed minded but you seem lost on this point!!
    Educate me further (and I mean actually address my questions this time), how is being on the IIROC platform an upgrade? There's pros and cons to both. Don't be so arrogant! I choose MFDA because I don’t believe advisors should be stock picking and should leave the securities selection to the smart money – just my opinion, totally respect an advisor’s choice in doing this. Leaves more time to do the really important stuff – financial planning.
    I think I was accurate with my assessment before; you have limited perspective. Maybe you just focus on high net worth individuals? You've totally discounted the market segment that doesn't have assets significant enough to cover the costs of business using just a trailer model. Again, with proper explanation of the DSC fund details, they should expect and be getting the planning they need while the advisor is compensated sufficiently. This becomes a competitive disadvantage if applied on clients with larger portfolios – that’s where FE zero and F Class can easily be applied.
    Fair deal for the client and advisor, no penalization, no trickery, no unprofessionalism!
  • Michael Schonewille | 01 May 2015, 05:29 PM Agree 0
    Mr. Birney,

    Would you have been able to survive your first few years in the business on a 1% trailer fee? It's all well and good to say that DSCs are bad but the truth is you've had some benefit from it so why not tone down the indignation a bit.

    As you are a former smoker, telling someone not to smoke is perfectly reasonable and prudent. On the other hand, calling them a filthy pig would be hypocritical, unless of course you considered yourself to be a filthy pig as well.

    Similarly, throwing around terms like "nothing short of criminal" or "tricking clients" is hypocritical in my opinion, unless you're prepared to admit that at one time you were acting in a manner nothing short of criminal and tricking your clients.

    "Judge not, that ye be not judged".

  • Tim Hazlett CFP RRC | 02 May 2015, 03:11 PM Agree 0
    Hey Will

    Seems to me that most articles I read which you have part of leans toward tearing those that are trying to build a clientele for themselves apart. There are many young advisors that have to find a way to survive until they build a solid clientele for themselves.

    Many of these young advisors are working very hard for their client on a daily basis, while building a solid education, such as the CFP, RRC, CLU, many with University degrees and other education. It is in fact my experience that these young advisors work very hard for each and everyone of their clients as they cannot afford to lose them.

    I believe it is every bit self serving stating that you do or do not believe in certain types of commission, when he knows for a fact that he needed the same type of commission he is currently tearing apart (DSC) when he first started.

    We need to start talking about the real problem here. It is those out there that are stealing from clients or not having the appropriate discussions about how they are paid.

    It is not our job to tell a client how they should pay their advisor, however it is the advisor's fiduciary duty to explain exactly the fees the client is paying for the services provided.

    It is very easy for someone that is sitting on lord knows how big of a book, thinking more than 50 million and then tearing those apart for offering DSC fee, the same fees he depended on to built his clientele.

    Let's get more balanced Will, seems you are for the Fee Based Guys and those Commissioned Sales guys that like to tear apart others.

    It is certainly in very poor taste when this guy used to sell the same thing he now tears apart. Let the informed client decide how they pay there advisor.

    I no longer need to sell DSC fees/schedules any longer either but I would never tear someone apart that uses them, as long as they are up front with the client as to how they are paid and show the illustration of the DSC schedule, it is indeed not illegal.
  • Tim Hazlett CFP RRC | 02 May 2015, 03:36 PM Agree 0
    Hey Ross

    I don't think this is exactly the place to be sending out personal attacks against fellow professionals, namely Mike Travers. It is great that you have been very successful at this business but to personally attack others for having a difference of opinion, is very unprofessional!

    You can go ahead and attack me as well because I also don't agree with your opinion, in fact at one point in your career you offered the same product, you now consider criminal.

    Now does that make both You and I former criminals because we started out using DSC schedules? I think not.

    Come on let's act like professionals on here after all it is Wealth Professional Magazine!
  • Marc | 02 May 2015, 03:53 PM Agree 0
    Any fund of any load version is OK as long as there is total disclosure and clients understood. The media, including this publication, is joining the "anti-fee" band wagon (notice the usual headline and one-sided commentaries?). Most advisors who don't have the guts to disclose their compensation use front-end, zero-commission, 1%-trail model. That is your choice. I don't want to spend my precious time and expertise creating a sophisticated wealth management solution and not get paid upfront, just praying that the client does not die early/soon or leave before I get paid my 1% trail over the year. I am not a charity but a wealth manager and must be compensated accordingly. Otherwise, take your money and do online, self-directed investing. At the end of the day, the foremost goal is to grow capital and not save fees. An advisor selling FE funds and simply collecting trails will likely not do anything else after making the sale. Waste of time arguing about fees. Period.
  • Marc | 02 May 2015, 04:04 PM Agree 0
    Ross Birney, you are only saying that because you have already a good-size book so just getting a trail is OK. Why not? You already sold them (your clients) DSC before, so it does not make sense to DSC them again. BTW, I am not for DSC but for the low-load versions. Either way is OK as long as there is total disclosure and clients understood. Now, imagine yourself getting fired by Raymond James and not one client followed you to an independent firm. Starting from scratch, would you still be singing the same tune?
  • Richard | 02 May 2015, 06:49 PM Agree 0
    In these discussions different issues invariably get entwined. DSC fees and commissions do tend to go together but there is no law saying that they must. So let’s separate the issues. The DSC fees on their own, don’t look that bad at all. Basically you are saying to the client, “look, if you are willing to commit your investments for the long term we will give you a discount on the MERs, and in the long run you will be better off”. Businesses have had these kinds of promotions all the time, ie. the 2 year cell phone plan.
    Now linking the DSC to commissions is another issue and it does create is a conflict of interest, but then almost any commission structured business has some conflict. One might argue that we should all be salary or fee based but there is no doubt in my mind that if that were the case there would be many more people out there without advisors and according to most reports I have seen, people do better with advisors, warts and all.
    Note: I think many advisors would be happy to give up the commissions if they got the full 1% trailer fee.
  • Will Ashworth | 04 May 2015, 09:02 AM Agree 0

    I've seen your comments directed to me. I will reply as soon as possible. I welcome your feedback. Keep the comments coming.

    Just a gentle reminder to all commenting that this is meant to be an intellectual exercise examining the issues wealth professionals face every day.

    I don't mind spirited debate but let's keep it civil.

    Thanks for following this thread.


  • Ross Birney | 04 May 2015, 10:13 AM Agree 0
    Wow, it sure doesn't take much to push some people's buttons!

    Just for clarification, the quote "...nothing short of criminal..." was never made by me.

    Unfortunately, many of the posters here believe in the practice of never letting facts get in the way of a good argument.

    A successful career in the financial services industry is a marathon, it's not a sprint. If you treat your clients as you would want to be treated, give them a fair deal and the respect they deserve, you will then earn their trust. Once you have that, they will not only give you all of their money, they will recommend their friends, family and business colleagues as well. That's how I built my practice, not by relying on the sale of DSC funds as some have suggested.

    I have also advocated upgrading one's licensing as a way of providing additional services to your clients and reducing the pressure to make "the big sale". The problem with only being licensed to sell mutual funds is that if the only thing in your toolbox is a hammer, the solution to every problem looks like a nail. Some posters here have questioned whether I could live on a 1% trailer fee alone. The honest answer is that I don't know because a mutual fund is not always the solution to every client need. I also earn fees/commissions from stocks, bonds, EFTs, option trading, insurance and a host of other products and services my clients need. If a mutual fund is recommended it's because it's best for the client circumstances, not because it's all that I am able to sell. The more client needs you can satisfy the less reliant you will be on DSC mutual fund sales.

    In fact, how you're paid for your service is irrelevant. It's whether your client perceives value for the fee paid that counts. If they do they'll stay, if they don't they'll leave.

    All the arguments made by those defending the use of DSC fees are the same as were made by those defending the 9% up-front commissions of many years ago.

    But then the industry evolved, the investing public became smarter and the 9% up-front fee disappeared, as did those who "needed" it to survive.

    Today, the industry is much more evolved and the investing public is becoming smarter every day. Use of the Internet as a tool to increase awareness is far more prolific than ever before. CRM2 (and future versions) as well as the push for fiduciary responsibility for advisors in the US will have a significant impact on how investments are sold. Those that sell on a DSC basis should pay close attention to all of this.

  • Marc | 04 May 2015, 01:39 PM Agree 0
    Will Ashworth, I agree with Tim Hazlett. You may have unknowingly "promoted" once-upon-a-time DSC-using advisors who have already built their books selling DSCs and are now collecting trail and claiming the glory of FE-class only strategy. Where a client's long-term horizon should be more than 5 years, BUT what's stopping clients/advisors from selling a position that has already grew by 40% (like US Midcaps) even if there is 1.5% DSC left? A good advisor is measured by total return under managed risk and excellence in service. He should know when to deploy capital from cash (and ergo, when to get out at a profit) VERSUS simply buying FE funds (and collecting trail) as soon as that advisor has been handed a cheque. Your article really sounded/looked like a promotional material for this advisor, Ross Birney. This is just another noise post-1999 and re: CRM2. BTW, where were you in 1998/1999?
  • Niki | 04 May 2015, 01:53 PM Agree 0
    This is the best debate ever--but who has actually asked the clients what they prefer? More options are better than fewer options. And no one in this debate has figured out a way in which everyone in this industry can do what they do for nothing--not even the regulators do it for nothing. If I were not in the business, I would still be in business. And I would still be making money doing what I love to do best. Having said that, I might even make more money by not being in this business. And only communists would dare to question the fact that I have a right to do business in a free enterprise (not so much anymore) capitalist system, and that by doing so, I am helping other make money too. Yes I care. My shoe store is not required to disclose how much money they make on every transaction I do with them, or the grocery store, or the auto insurance, or the airlines I use, or the gas stations I buy my gas at, and so on and so forth. This debate is really interesting, but it misses the objective by a long shot--what is in the best interest of the clients. At the end of the day, there are so many poorly educated FAs, part-timers, bad investments, people investing other people's money that should never have been given the position to sit in front of their clients and make recommendations, that no debate over DSC/FE zero/ embedded commissions could ever repair any of those real definitive problems. I know; I see the terrible investments that people come in every single day asking me to help fix the disaster they signed into--with or without DSC. A deferred sales charge does not lock anyone in, it merely allows a client to avoid paying a commission up front--should they chose that type of investment over all the other options available, including stocks, bonds etc... and they can chose a really short schedule too. So why are we focusing on what is moot when the real problem isn't the method of payment, it is bad investments and terrible FAs, many of whom are not even required to be licensed, like MICs and market exempt, as just a few.
  • Steve Scatterty | 04 May 2015, 02:01 PM Agree 0
    Mr. Birneys statements are quite interesting. The articles summation of his statement presuming clients might be surprised to find out they are locked in to DSC funds for 5 years or more presumes that the advisor in his example has failed to comply to any and all regulations requiring the advisor to disclose either the schedule or cost. CRM II is designed specifically to deal with both of those issues.
    Regarding an advisor earning $5,000 to onboard a client, there are many Financial Service Professionals among us that are providing rather extensive Financial and Estate Planning Services, that feel a fee is due and payable prior as part of the engagement of their services. If Mr. Birney feels the value of his onboarding services are being provided at a $0 cost, then perhaps $0 is a reasonable charge for the services rendered.
    At the end of the day clients deserve clarity regarding all costs and compensation and choice for the methodology of compensation, be it Fee Based, Fee for Service, Transaction Based or as Mr. Birney is charging and Embedded Compensation of 1%.
  • Will Ashworth | 04 May 2015, 04:12 PM Agree 0

    Let me speak to your example of 40% upside and a 1.5% DSC remaining.

    First, a 1.5% penalty applies to funds that have generally been held for 7 years.
    So, a 40% total return on an annualized basis is 4.9%.
    On $10,000 the client would pay a penalty of approximately $150 to sell in the seventh year.
    You're absolutely right that the client would still have almost $3,900 profit in a non-taxable account which isn't half bad.
    However, if the client bought $10,000 in the XSU, they'd have a $6,200 profit with at best $100 in commissions paid out.
    But forget ETF options for a moment and consider the FE/DSC comparison.
    Under the DSC option the dealer gets ~ $980 in fees.
    Under the FE option the dealer gets ~ $960.
    Under the DSC option the fund company gets $20 less which goes to the dealer.
    Under the DSC option the client pays a $150 penalty.
    Under the FE option the client pays no such penalty.

    Unless, I'm missing something, the client is $150 ahead in terms of fees paid under a front-end load structure.

    I think you're suggesting the services provided by the $500 in upfront commission is worth more to the client than the $150 penalty.

    Is this correct?

  • Marc | 04 May 2015, 04:44 PM Agree 0
    You are so wrong, Will Ashwort. You are assuming that whoever was selling the FE (for example, Ross Birney) has the same expertise as mine when in comes to having the feel of when to get in and out. You seem to be even agreeing with Ross Birney even when your role should be neutral to present the pros and cons of all sides. You even used the example of ETF. You again assumed that clients/advisors got in and out at the best time. Bravo, the ETF guys ara applauding you for the free marketing at the free marketing/promotion you just did. Bottomline, you should not promote one side (or take sides). Transparency and mutual agreement between client and advisor are the key. Stop sensationalizing this issue just to sell your article.
  • Marc | 04 May 2015, 04:52 PM Agree 0
    Addenda for Will Ashworth: Have you ever managed money? Assuming you do, because you care very much about me saving money and to nickle-dime the value of financial advise, I will give you $500K tomorrow and I would like you spend this all into buying XSU, at market, and will pay you $250 commission. Meanwhile, I would like you to call me monthly, send me market update on a quarterly basis, write my financial plan, review my tax situation every year, do an annual review every Dec 31st and do not sell any of my position for the next 5 years. You like this deal?
  • Will Ashworth | 04 May 2015, 05:08 PM Agree 0

    I agree that the ETF example without throwing in the advice component that a fee-based planner would charge on an annual basis is an apples-to-oranges example.

    You are also right that transparency and mutual agreement between client and advisor are key.

    I won't dispute that.

    But to suggest that I'm sensationalizing this to generate interest in my writing is completely unfounded.

    As well, questioning Ross Birney's experience also seems off base but this is an open discourse and you are free to comment as you wish. I do appreciate your feedback even if I don't agree with it.
  • Marc | 04 May 2015, 06:20 PM Agree 0
    Will Ashworth, just take a second look at the title/heading of your article. You might as well added "By Will Ashworth and Ross Birney." This is an open discourse. Or it should be. But you have been singing "infallible" praises to Ross Birney. Again, try going out there and build a book of business from scratch. Just like they say, online publications/newsletters spring up like mushrooms when it rains. After all, it is easier to preach than to practice.
  • Will Ashworth | 05 May 2015, 10:59 AM Agree 0

    Please read the article below. I've focused on the quality of advice rather than fee structure. DSC, FE, or fee-based, good advice done right is what's best for the client and advisors certainly are capable of doing so under a DSC fee structure.

    While we have a difference of opinion I appreciate you commenting on this very important subject.

    Feel free to email me at to discuss further.


  • Kevin | 23 Nov 2015, 11:20 AM Agree 0
    I recently sat down with a Financial Planner working on behalf of one of the large Mutual Fund companies with my elderly parents to discuss the financial management of their sizable estate

    My parents acquired their wealth from real estate, habitual saving, low risk investments, and with minimal help from Financial Advisers. They don't understand mutual funds and their nuances.

    Feeling they needed help with their estate at this point in their lives, they sat down with this Financial Planner who laid out what appeared to be a reasonable plan addressing most of their concerns. He proposed a general structure and highlighted the benefits. I asked for the plan to be emailed to me, and that's how I learned the name of the fund where he planned to place the bulk of their nest egg. I proceeded to do my research, and immediately learned it had a 7 yr DSC.

    I don't see how this could possibly be in the best interests of my elderly parents...they may pass before the fund even matures. I'm ticked at the lack of transparency, as he had already arranged a meeting for them to sign on the dotted line… a meeting that has been canceled.

    Btw, this Adviser came highly recommended from a family member. How often does this happen when the Lamen customer hasn't had the risks of their investment disclosed, and doesn't have the savvy to ask the right questions? Those referrals are meaningless. As an investor I demand transparency, and because I can't see any benefit/protection for my parents, but plenty of the same on the side of the fund company, I must assume the investment company/Financial Planners' needs come first...if it quacks and walks like a duck, then guess what?

    Further, I can say with confidence that any industry that doesn't put its customers interests ahead of their own will see it short lived, and/or forced to change.

    Btw...I don't have a problem with Financial Planners making a living, but the model must ensure alignment with customer needs first.

    Customer needs first - Customers will flock to you with that one simple lesson.
  • Will Ashworth | 23 Nov 2015, 12:10 PM Agree 0
    Hi Kevin,
    Thanks for your comments on DSC funds. I would love to do an article that speaks to advisors from a client's perspective about what you expect from the relationship.
    If interested, email me at and we can discuss further offline.
    Will Ashworth (author of the article you commented on)
  • Ross Birney | 23 Nov 2015, 12:34 PM Agree 0
    Kevin, your comments demonstrate precisely why so may professional financial advisors want DSC fees banned. They simply are not in a client's best interest.

    It is odd that the "bulk of their nest egg" was to be placed in a single mutual fund. Normally a greater degree of diversification would be desired.

    The fact that the fund(s) recommended to your parents were to be sold on a DSC basis is very significant to them and is supposed to be fully disclosed. If this disclosure was not made then the salesperson (you can't call this person an advisor) may be in violation of industry regulations. You may want to pursue the matter with the salesperson's branch manager or the Compliance department for the company.
  • Jim Zoellner | 23 Nov 2015, 12:49 PM Agree 0
    The only thing that matters is "Do DSC fees benefit the investor in any way. Would someone list please the benefits to the investor for DSC fees. DSC fees serve only the advisor and that is not what we are all about; so I thought. DSC fees are abused by most advisor. Would anyone of you be willing to lock in your mortgage for 6/7 years at 6%7% today?
  • Mike Travers, Certified Financial Planner | 23 Nov 2015, 04:53 PM Agree 0
    Agreed, DSC isn't a fit for an elderly client and given "sizable estate", the advisor is likely compensated enough on trailer. If done as Kevin outlined, obviously not suitable.

    But this still doesn't make the case for an outright ban on DSC!! As is the argument made here by some on this thread.

    Jim, I don't understand your analogy on a 6% doesn't make sense in comparison to purchasing a DSC fund as an investor.

    Kevin, working with a smaller client and having them purchase in the DSC option provides compensation to the advisor for time they (should) spend with the client. If offered with full disclosure of fees and how the schedule works, it's really presented to the client to make the decision. I think the lack of transparency is the real issue, not the load option.

    Any advisor on here banging their pots and pans against DSC has forgotten the smaller client as well as the need to keep revenue in mind when building a practise.
  • Debbie | 23 Nov 2015, 04:59 PM Agree 0
    Kevin you may find this of interest
  • Wealth Advisor | 24 Nov 2015, 09:35 AM Agree 0
    The investor's perception of DSC is very interesting - certainly demonizing DSC sales to the exclusion of all other factors according to his note. If that Financial Planner gave Kevin an alternative: FE@1% or DSC, Kevin's perception might change.
    If DSC still doesn't work for Kevin, he should negotiate with his planner. How about FE@0%? How about a fee-based account @ 1%? With CRM2 here, negotiation is not optional -it's mandatory!

    For those youngster advisors out there with less than a quarter century of experience, don't forget that when DSCs were introduced in the 1980's, they eliminated overnight ,8% loads and effectively killed front-end loads altogether. It also singlehandedly killed the churning or the temptation to churn, mutual funds which until that time, were traded like stocks. The AUM fee we call a trailer was an incentive not to trade funds as if they were stocks. Fee for service fees accomplish the same thing.
    The issue today with DSC is that most advisors have voluntarily eliminated all front-end-load commissions and set them to 0% and DSC sales have plummeted as a result. Some major fund co's have reported DSC sales down into the single digits.
    From the perspective of the client, given your choice between two identical mutual funds, do you want to be locked in for 7 years or not being locked-in at all?
    The only way to keep both offerings equivalent is to change how DSC works and that is to have chargebacks. If the investor bails out early, the advisor gives up his up-front commission pro-rata. If the investor keeps his investment, then the advisor keeps his up-front compensation.
    Such a system would benefit new advisors building a book and give DSC investors liquidity equivalent to FE should they need it.
    Having said that, I believe that the trend to lower and lower DSC sales will continue and unless a regulator bans DSC, loads and trailers in one fell swoop, DSC may die a death of neglect at some point.
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