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Wealth Professional | 18 Jun 2015, 09:15 AM Agree 0
The latest report from the CSA on fund fees may have miffed embedded commission advisors, but the second one will likely have them up in arms.
  • Larry Hillmer | 18 Jun 2015, 10:50 AM Agree 0
    My solution to investment-bias-based-on-trailer is not to ban embedded trailers but to have a trailer that has been agreed to between the adviser and the client. The same process as fee-based accounts except having the fee charged at the fund level. Series A 1.5%, Series B 1.25%, Series C 1.00% etc. With the current system, the only way to "charge" a 1.25% trailer with a small client is to show them funds that pay 1.25%.
  • Michael Gentile | 18 Jun 2015, 12:26 PM Agree 0
    If I understand this correctly "Cumming" has concluded that imbedded compensation is the overriding factor on investment selection NOT fund performance or managerial track record, needless to say his statement at best is incredibly broad and at worst totally inaccurate.

    The other comment
  • Mike Gentile | 18 Jun 2015, 12:41 PM Agree 0
    If I understand this correctly, "Cumming" has concluded that imbedded compensation is the overriding factor on investment selection NOT fund performance or managerial track record. Needless to say, his statement at best is incredibly broad and at worst, totally inaccurate.

    The other comment "what on earth does running a business have to do with the question at hand?" It has a lot to do with the question. Unless I miss my guess entirely, the object of this whole exercise is to eliminate any and all imbedded compensation on the assumption that all advisors are only interested in offering funds that pay the most income regardless of performance.

    In conclusion, the dictionary definition of "business" is "the practice of making ones living by engaging in commerce" or providing services in exchange for money.

    Please let me know when that changes.
  • Harley Lockhart CLU CHFC | 18 Jun 2015, 07:21 PM Agree 0
    1. Funds that pay commissions underperform--this can only be true for the identical fund in different classes. Some funds that are available only on a commission platform are very competitive with non-commission funds that invest in the same asset classes.
    2. Advisor recommendations are sometimes biased in favor of more compensation for the advisor. To determine if this is widespread, it is simple to identify those funds that provide higher compensation and compare the total asset value to funds that pay a more standard commission. If this is a problem, the higher compensated funds should be significantly larger. If not, one must question whether the draw of the higher potential commission really has much impact.
    There are definitely costs to doing business, but please don't direct regulators attention there. An advisor and client must agree that the value provided by the advisor justifies the commission, in the same way a fee must be justified. Let's allow the client to make "some" value judgments. The method of compensation is moot.
  • Brad jardine | 19 Jun 2015, 09:56 AM Agree 0
    Wonder what some of these fee only advisors charge their clients? Try 1.4% on the first $250,000... plus MER of underlying ETF's and account fees from trustees... do the math and let's see how much it really costs a client to be there.
  • Will Ashworth | 19 Jun 2015, 11:45 AM Agree 0
    Brad,
    Good point on the fee-based advisor and what the client ultimately pays.
  • Ken MacCoy, CHS | 20 Jun 2015, 11:51 PM Agree 0
    Excellent points Harley.

    IMPO, the following excerpt from an Advocis email dated June 18th says it all: 'the principle that preserving consumer choice in how to structure the advisor-client relationship should be the regulator's chief concern'.
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