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Wealth Professional | 24 Nov 2015, 09:15 AM Agree 0
Some may be criticizing closet indexing, but advisors are defending the practice pointing to the limitations of the Canadian equities market
  • Robert Roby | 24 Nov 2015, 01:03 PM Agree 0
    One good dividend mutual fund and one good value fund for Canada along with a few ETF:S such as health care and agriculture, coupled with individual US dividend paying stocks and a true International fund such as Mawer. Very nice portfolio.
  • Ken | 24 Nov 2015, 04:35 PM Agree 0
    These funds should be sold as index funds with a very low MER . Overcharging Canadians is just a form of misrepresentation and theft .
  • Robert Roby | 25 Nov 2015, 02:29 PM Agree 0
    Hello Ken

    If you believe that index funds are the only answer you are gravely mistaken. Theft and misrep is where one does not provide full transparency. I can recall in 2009 when the market crashed the eft side of the portfolio came down 51% and the stock fund side came down 18%. It not all about costs its about the total value you bring to the table. If that was not the case anyone can buy an eft, so perhaps you will soon be out of a job.
  • Ken | 25 Nov 2015, 04:57 PM Agree 0
    I believe it is unethical to charge full price for a closet indexer. If salespersons want to sell index products they should sell lower cost index fund.If reps had to comply with a fiduciary standard this type of mis-selling would not be occurring.
  • Robert roby | 25 Nov 2015, 06:07 PM Agree 0
    What exactly are advisors charging for? Of course we should always look after the client. You cannot simply generalize as you have done. Fees are based on the value brought to the table and every advisor brings more or less depending on their experience. Fees are decided upon for the services received. Fees are only an issue in the absence of value. So, what do you bring to the table ?
  • Ken | 27 Nov 2015, 03:55 PM Agree 0
    You are missing the point. A fiduciary would recommend an index fund which is cheaper and outperforms the active fund.But index funds do not pay high trailers so they are rarely recommended- they are just 1.5% of mutfund assets.If advice fee of1% was separated out things would work better for victimized investors.
  • Robert roby | 27 Nov 2015, 04:49 PM Agree 0
    A fiduciary would not assume that the future performance of an index fund would out perform another investment. Furthermore, a fiduciary knows very well that past performance is not a promise of future performance. Therefore, I am going back to the value provided.
  • Ken | 27 Nov 2015, 04:59 PM Agree 0
    In that case proposed new regulations could be a big problem for your practice. Anyone who doesn't believe fees count should read the available industry independent research.When advice fees are broken out and performance reported it is my expectation that many, many questions will be asked by retail investors.By the way ,have you seen latest SPIVA report and the research on closet indexing in Canada?Shocking,no?
  • Robert roby | 30 Nov 2015, 12:42 PM Agree 0
    You have missed the point. what my argument is is that we as advisors have a fiduciary responsibility as it is. this is not an argument about ETF,s etc etc, this is an argument about what is right for the clients. With respect to closet investing I agree their are many lousy mangers out there and their are also a few very very good ones. As an independent I have the best of both worlds without having to restricted product wise by corporate pressures. In addition have a securities license gives more scope to our offerings as well. After 28 years of experience in this industry there is little I have not seen.
    One could therefore argue that any advisor holding just a mutual funds license, working for a large bank based company with proprietary products could not in any way fulfill their fiduciary responsibility? Perhaps, perhaps not.
    Have a great day. Bob
  • Ken | 01 Dec 2015, 01:57 AM Agree 0
    You are legally incorrect . Dealer reps do not owe a fiduciary duty at all. They need only meet the very low suitability standard.IFIC oppose introduction of the fiduciary standard. Visit for the true state of affairs of advice in Canada.
  • Robert Roby | 01 Dec 2015, 11:19 AM Agree 0

    Legally you are correct morally is another story. All advisors should uphold the higher moral ground regardless of the minimum standards. That's all I have to say about this subject. Thank you for your comments.

  • Larry Elford | 01 Dec 2015, 08:33 PM Agree 0
    A typical mutual fund salesperson in Canada does not carry a) an advisor license or registration and b) a fiduciary duty (unless a half dozen special circumstances are met)

    Ken is correct according to my information. I do stand to be corrected, and I am happy to retract if provided with a bit more detail.
  • Robert Roby | 03 Dec 2015, 05:08 PM Agree 0

    As I said. We have a moral responsibility to uphold a fiduciary duty regardless of the current laws. Secondly, Ken's choice of words is very argumentative and unnecessary.
    This whole issue of fiduciary responsibility will be interesting. For example, if you sell index funds do you sell the advisor one or the fee based one.? If by chance the mutual fund outperforms the index fund have you failed your fiduciary duty. If you sold an ETF due to lower fees and the etf comes down by 50% but active managed fund came down by 29%, have you failed your fiduciary duty. If you work for IG or the bank and sell a proprietary fund that underperforms a competitors have you failed your fiduciary duty? The answer to this is yes. On the other hand are we not advising clients that past performance should not be a factor in determining future performance? Again yes. Therefore, to fulfill our fiduciary duty morally and soon legally( if the higher standard becomes law) why would past performance, which is simply rear view vision play into this? If you want to fulfill your fiduciary responsibility, it transcends the cheapest product. Its about providing professional services from financial planning to life staging to premium services and much more. One final thought...what about Vanguard ETF's...?? They have the lowest MER's thus they should be all advisors choice..or should they? Morally yes. Legally no. Or how about individual stocks thru a robo advisor? Or how about advising clients to buy thru a robo advisor for products and then charging clients for the services they use? My point is, is that we all have a fiduciary responsibility to our clients regardless of the law. One more thing. How does an advisor who only sells mutual funds fulfill a fiduciary responsibility? Doing what's best for the client seems to me having all products available be it stocks, bonds, mutual funds, alternative investments, private wealth just to mention a few. All of this will be very interesting and will root out those who sell funds from the confines of their basements next to the kitty litter and others, including those who have quotas and selling targets relative to commissions earned and so forth
    PS: Ken, for your info on how we run our practice please see page 22 on the most recent issue of WP magazine which came out a few days ago. This is what clients pay me for.


    Bob Roby
  • Ken | 04 Dec 2015, 04:00 PM Agree 0
    Quite right. Fiduciary duty is not product focussed ; it is focussed on the client. Sales incentives play no role in the recommendations made.
  • Winston Cundhill | 07 Dec 2015, 12:39 PM Agree 0
    Arthur Salzer is simply wrong. Active managers and / or manager pickers like himself are losing clients because the clients are becoming more informed about the very low probability of active managers beating a proper risk adjusted benchmark or adding any value.
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