Bayer also feels the fees associated with mutual funds are too high, especially when there is no way to accurately predict how well (or badly) these products will perform over the long term. He says that the industry is driven by profit alone, inevitably placing the client’s needs in the backseat.
“Incubated funds will have great results for the first year or two and then, of course, after a few years their performance will be pathetic,” he says. “Active managers never stick to their mandate ... they go with their intuition, or forecast or whatever their crystal ball tells them to do…It’s about revenue, that’s their primary concern and pleasing the executives and their shareholders.”
Although, Marta Stiteler, a Hamilton-based independent financial planner, agrees fees are too high, she says the industry is shifting in a positive direction and that investors, over time, will see fees come down. Stiteler – who considers herself a solution-driven educator, not a sales person – believes the advice she offers is invaluable and worth every penny her clients spend.
“People outside (the industry) are looking in to throw stones, but we have to get paid somehow,” she says, adding that many of her clients are surprised by how little she makes on the products she sells. “People have to get used to the idea that if you want help, you have to pay for it.”
Bayer – who shifted to fee-based advising in 2002, and strictly fee-only in 2012 – isn’t convinced self-professed altruism is widespread, suggesting 95 per cent of commission-based financial advisors act as salespeople because the industry demands it.