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Wealth Professional | 26 Feb 2015, 11:14 AM Agree 0
The Canadian Centre for Policy Alternatives condemned mutal fund fees Wednesday but is ignoring advisor-offered alternatives that are now the norm.
  • Kathy Waite Your Net Worth Manager | 26 Feb 2015, 12:26 PM Agree 0
    I think the point Rob Engen, myself, Sandi Martin, Larry Elford, FAIR, Jonathan Chevreau, David Chilton, Preet Bannerjee ( and if you don't know who these people are you need to get out once in a while and not just drink your mutual fund dealers Kool aid) is that all businesses need to make a profit or they will not be there to look after clients long term. The issue is transparency , what am I paying and for what ? Then a variety of choices for people ETFS, mutual funds, active or indexing.
    People are their own worst enemy spend more time planning a vacation that their retirement.
    Its interesting I always get a slew of new clients in bad markets. In the good the apathy prevails.
  • Gerald Curtis | 26 Feb 2015, 12:49 PM Agree 0
    It never ceases to amaze me how data can be so skewed by people with an agenda. The CCPA objective of every Canadian having access to money management at less than half a percent of assets is just totally unrealistic.
  • Bob T | 26 Feb 2015, 12:51 PM Agree 0
    Apples to Apples comparisons are virtually impossible here but it seems that one of the real risks to retirement savings is really ignored in this report.

    What about the investor who buys his RSP at his bank and invests solely in GIC's because they are "safe". Recent GIC rates are around 2%. How long would you have to work at that rate to retire with the same numbers as the "pension fund" shown in the report.

    Advisors can only work with what is available. If fees are the major predictor of performance wouldn't you, therefor, be better off with GIC's and no fees.

    A good advisor can guide a client through the choices available. A good advisor "not a captive advisor" could point out to a client that Investors Group has the highest fees. A good advisor can point out the risks on the downside of investing solely in ETF's and tailor a portfolio of investments which meet a clients risk profile.

    A good advisor controls
    1. risk
    2. costs
    3. suitability
    4. diversification

    A good advisor informs clients that nobody is smart enough to predict where markets are going to go in the future but structures a prudent approach to investing.

    A good advisor needs to be paid for providing that advice but does so without hiding that compensation. Banning trailer fees for me would be a good approach but make sure that the press also advises people that they need to be prepared to pay a reasonable amount to an advisor.
  • Ross Birney, CPA, CA | 26 Feb 2015, 12:52 PM Agree 0
    If "they" truly want to clean up the mutual fund industry they could start by banning the sale of funds on a deferred sales charge basis.
  • Gerald Curtis | 26 Feb 2015, 12:56 PM Agree 0
    It never ceases to amaze me how data can be so skewed by people with an agenda. Furthermore, the CCPA's suggestion that every Canadian investor have access to professional money management for less than half a percent of assets is totally unrealistic! As this article points out, the cost of running even the multi-billion dollar CPP fund was north of one percent.
  • Tim Sherwood | 26 Feb 2015, 01:21 PM Agree 0
    To compare one type of investment that includes an advisor that brings to the table financial planning, asset allocation, on-going re-balancing and particularly important hand holding during market meltdowns like 2000 and 2008 TO an investment that does not include the advisor and his value-added offering is deception at its highest. This is the biggest LIE in the industry that continues to be promoted by ETF providers and these great "think tanks". It is somewhat hopefully that WP is at least questioning some of these false comparisons but I would suggest much more honesty is required by all of us in this industry. We offer passive investing and active investing and operate on a fee-based model so we are not biased to one investment approach. However, this ongoing lie must be examined and challenged.
  • Lynda Weinrib | 26 Feb 2015, 02:05 PM Agree 0
    It is my understanding that part of the reason our MERs are so high compared to the US is that they have more money market funds. In addition, they are not required to send as many reports as is required in Canada, and that is extremely expensive. By the way, I used to own US mutual funds, and found the fees on those I also owned in Canada to be similar.... hmmmmm
  • Bea | 26 Feb 2015, 03:07 PM Agree 0
    Also, the CPP does not typically have to deal with lots of questions from clients, updating KYCs, checking suitability, etc.; the CPP doesn't help you with your taxes, or how to help your dad handle his money, or provide your child with resources on some basic financial matters, and all the other things that firms and advisors providing customized ongoing interactions with Canadians do. Was it Churchill who said there are "lies, damn lies, and statistics?" That's unfair, of course, and I have a great respect for the intentions of the CCPA author. What is true, however, is that most people have very strong views, but before expressing them it would be better to try to understand the whole story. That part of management fees going to the dealer and advisor provide for the basic infrastructure to keep the business in business for when you need them (including investor protection insurance, regulatory costs, telecommunications, etc.) and the other part pays for a range of services that it can be a lot more expensive to get from a lawyer or accountant or tax professional, all on top of selecting investments.

    And if these high MERs were really so high, why wouldn't we see more firms and advisors moving INTO the industry rather than leaving it? Just saying...
  • Cameron | 26 Feb 2015, 05:07 PM Agree 0
    100% agree Ross. Imagine if you as a CPA/CA were paid by CRA.... DSC's are criminal.
  • Tim Affolter | 26 Feb 2015, 05:35 PM Agree 0
    And STILL the focus is on the absolute level of the fees, as if the COST is the most important thing, rather than the VALUE delivered.

    My hope is that the transparency being mandated by CRM2 will also bring with it an unbundling of the recipients of the fees, and what that party brings to the client. The breakout of fees will allow us to highlight how much goes to the investment manager, the fund manufacturer, the portfolio manager, the dealer and, finally, the advisor. Each layer provides a service for the client: security selection, product innovation, tax efficiency, reporting, compliance oversight, IPS process and asset allocation, rebalancing, and client communication/handholding. This is all part of what every Investment Advisor delivers, north or south of the US border.

    What the client MAY also be paying their advisor for is Wealth Planning, including a written financial plan, tax advice and preparation, estate planning, risk management, external information aggregation and interpretation, professional team coordination, and proactive service to track and act on recurring priorities on a timely basis. Many people simply don't have the time and/or expertise to do these things for themselves.

    The problem with the embedded bundled fee model is that, although it is simple for the client, but not accountable. The client MAY get more of these services as the account size grows and fees rise, but they are not assured of it. Lack of transparency provides no way to track or compare services between advisors. Good Wealth Planners have nothing to fear from the transparency and accountability required by CRM2, and everything to gain as their profession is legitimized.
  • Bill | 27 Feb 2015, 12:34 PM Agree 0
    CRM2 makes sense. It is a starting point that creates a level playing field where an apples to apples comparison can be made on the price paid and the value received. As Tim Affolter points out: the new rules quantify what's being paid to the Manufacturer and what's being paid to the Dealer/Advisor. Now clients can decide if the Value they are receiving is worth the price they are paying. The next logical step here would be to further break down the costs: what's the Dealers Cut, what's the Advisors cut, what's the portfolio manager's cut, what's the cost of oversight etc. This provides a more accountable compensation model for all parties involved. A dealer (and advisor) getting paid 5% DSC on a fund-of-fund product with no additional financial planning work is bloody criminal; not to mention the practice of using a leverage strategy or breaking a DSC schedule and implementing a new one simply to inflate the commission statement. Most of us provide value added service for what we get paid, however, there are those that do not and the new rules will help to flush them and these "bloody criminal" practices out.
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