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  • John De Goey | 11 Jun 2015, 01:42 PM Agree 0
    In other news, the Pope is Catholic!
  • John De Goey | 11 Jun 2015, 01:42 PM Agree 0
    Hands up - who is 'surprised'?
  • Michael Gentile | 11 Jun 2015, 03:37 PM Agree 0
    Re: 3 Major Conclusions

    1. How do you conclude that funds that pay a commission underperform? We offer numerous funds on a front end zero basis that significantly outperform many funds with and without a commission structure.
    2. There is a cost to doing business which of course involves distributions. Show me a business that doesn't have distribution costs.
    3. Nothing like getting tarred by the same brush eh? We do not make recommendations based on compensation and never have. Our primary interest is in providing our clients with funds commensurate with their risk tolerance as well as consistent positive rates of return and meeting their short and long term objectives.

    In terms of a conclusion, I am willing to conclude that somebody didn't do a thorough job on their homework. Or to put it another way, there are 2 sides to the coin and I am not sure that they have acknowledged that.
  • Brian Shumak | 11 Jun 2015, 09:15 PM Agree 0
    Why not simply mandate that the client be given the choice of a fee-based model or a commission based model with defined wording describing each and questions that are given to the clients on these mandated form.

    At no time is it right to remove choice which mandating one method over the other (either way I might add) will do for certain.
  • Michael Gentile | 12 Jun 2015, 03:32 PM Agree 0
    I sent you a note yesterday in regards to the most recent OSC report on compensation for the sale of mutual funds. I find it very unusual that there have been no comments from others. Is this an indication that everybody is in agreement with this report and that all consumers are in agreement with a fee for service model?
  • A. Rickert | 13 Jun 2015, 02:14 PM Agree 0
    I agree with Mike. This is another crap report. I'm somewhat confused as the majority of funds being offered in the marketplace pay the same compensation whether DSC, LL, or ISC. Same trailer, so what funds are outperforming? I also agree with Brian, let the client decide, do you want fee based or embedded commissions.
  • A Wong | 13 Jun 2015, 03:10 PM Agree 0
    Fee based account is a good alternative, but fee received, in my opinion is just another form of commission (also based on the size of the account). Perhaps the focus should be on certain pre-established level of service excellence. Most fee based accounts have certain minim annual fee. This will exclude small size client to access valuable services from advisors ( or they end up paying a fee that would be higher than your usual MER on mutual funds). These smaller account will most likely ends up in the banking system where only proprietary products are recommended. Also, excellent branch staff will often move location as part of their advancement and client will not have the continuity they need in working with an advisor they like. The question to ask is" are we regulating how advisors are paid or are we trying to improve what we can offer to the general investing public?
  • Wealth Advisor | 15 Jun 2015, 09:15 AM Agree 0
    I read the report. Some comments below:

    - a bit disappointing; the report is just a study on the existing studies that are out there. This does not appear to be a new study based on the Canadian data they had access to.

    In reading the report, I have come to a different conclusion: There is no evidence that either method ( embedded vs. fees) is better or worse than the other. Therefore it not clear that the report can conclude anything useful that the OSC or CSA has not heard before.

    The Brondesbury report raises more questions than it answers. It describes other countries regulatory biases and assumes that it applies equally to Canada. From an academic viewpoint, that is a very dangerous assumption.

    From a regulatory viewpoint who have already seen and reviewed many of the studies mentioned in this study of studies, you would have to come to the conclusion there is likely no benefit to the investor to have only fee based accouns. The study does hint at some downsides to the fee-based model; reverse churning, wealth bias, proprietory product bias, possible higher costs than embedded commission and overall less access to advisors.

    What the report should have focused on is how mutual funds are sold at the advisor level in Canada.

    Here are just some things that the report did not address.

    What is the average trailer compensation for Canadian advisors under the current business model ( embedded compensation)?
    What is the average fee compensation for Canadian advisors using the fee-based model?

    If the hypothesis that compensation skews investment recommendations then statistically there would be evidence that average trailer income for Canadian advisors would be closer to 1.25% for equity mutual funds as advisors can choose to use a bank owned fund and get paid 25% higher than the "normal" 1.00% trailer. There would be also a hypothesis that the average fee could be much higher than the average trailer.

    Where are those studies and statistics?

  • Will Ashworth | 15 Jun 2015, 11:08 AM Agree 0
    Some great comments from advisors. Keep them coming.
  • robert | 15 Jun 2015, 04:41 PM Agree 0
    Your comments are very appreciated. I don't believe there really is one all encompassing solution. Furthermore, its impossible to place a dollar value on services rendered.

    Like most other professions advisors should be provided guidance numbers and then let the client and advisor decide on the rest.
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