Cummings report: Advisor reaction

Cummings report: Advisor reaction

Cummings report: Advisor reaction The dust hasn’t yet settled after release of the Cummings Report, but advisors have had enough time to digest what exactly the study of embedded commissions means for themselves and the industry.

WP has spent the last couple days canvassing advisor opinion and it can be distilled it down to key takeaways.

While it’s angered many transactional players focused on ensuring all Canadians have access to financial advice regardless of income, fee-based advisors see it as confirming their reservations about the “other” compensation model.

The CSA is poised to make a decision on the future of mutual fund fees by the first half of 2016, but here, first, is WP’s take on the Cummings report:

The benefits of the mutual fund model are ignored.

“Upon preliminary review, it appears that the report does not consider the monetary value of the financial advice provided to clients,” said Greg Pollock, president and CEO of Advocis. “Our anecdotal evidence tells us that Canadians are generally satisfied with the current commission system for mutual funds. There’s a cost associated with advice regardless of how it is paid. Not every Canadian can afford to pay an upfront fee for service, which can be several hundred dollars an hour.”

Fee-based advisors find support.

“This is a smoking gun,” said John De Goey, a portfolio manager with Burgeonvest Bick Securities Ltd. “It’s like the old ‘I Love Lucy’ show, you got a lot of explaining to do. The people who are proponents of trailing commissions have to explain that their insistence that there is no impact is squared with the finding of this study because it clearly does have an impact. The study just verifies what we already know but the people who insist it wasn’t so have to explain. I think it will be the final nail in the coffin but it will be another 8 months before we know for sure.”
  • Debbie 2015-10-26 5:32:24 PM
    Nonsense Mr Pollock! Canadians are not satisfied with the current commission system they are deluded and deceived by the existing scheme!
    The only reason they seemingly prefer it is because they do not understand it and the industry has given the illusion for years that it is free. It is hidden, misunderstood and not plain. If they had to say would you prefer to pay me "X" amount per hour or have the fund company pay me from out of YOUR funds "Y" amount and then state the exact dollar commission amount for that advice plus the trailing commission over the course of that year and beyond, consumers would be singing a whole new song and dance. It would not take long to realize that X amount per hour is likely far, far less than a % commission and trailing fees (usually for next to no service beyond the the original "sale" ) It appears "The lady doth protest too much, methinks." These pious arguments from Advocis have lost credibility. The facts in these reports indicate the both the gig and the jig is up!
    Read Andrew Teasdale blog
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  • Larry Elford 2015-10-27 8:01:03 AM
    ADVOCIS sounds more and more like HOCUS POCUS. To have changed their group name to a cross between "advice" and "advocate", and then to lobby continuously to be able to NOT be required to offer advice or products which would be demonstrably in the best interests of those they advise……is disingenuous at best and a hazard to the financial health of investors.
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  • Jim Zoellner 2015-10-31 8:36:05 PM
    Debbie I do not think that ALL Canadians are dissatified with the current commission system. You are assuming all but you really do not know if ALL are dissatisfied Some maybe especially the media who has been raving on about them for well to long. But not all----some.
    Let us not take the right to paint all advisors with the same brush. When you make statements you should be sure you have the fact all the facts and the real facts. Read the first sentence.
    On the other hand I will agree with some of what you say especially about no service after the first sale. There are two kinds of advisor or so called advisor one we call asset collectors---they are only interested in accumulating assets for the commissions and then there are those that have the right to be called advisors. Those that do the proper fact finding and then structure portfolios that match the clients needs and profile and follow up regularly. One of those is writing this note at this moment and I do not appreciate you painting all advisors with the same brush. You are out and out wrong.
    Yes the industry needs to do something about some of your concerns and in my judgement only the financial institutions are in a postion to do that but then do they the motivation to do so? you know what I mean.
    Yes you can tell me to charge a fee but if you knew anything about human nature you would know that humans prefer to know but keep it hidden. Read Thinking Fast and SLow.
    I have been in this business for 27 years and I have some very impressive credentials, have researched extensively and know what I am doing and talking about. I advise clients and do not collect assets for commission. Canadians need a lot of assistance in accumulating wealth most do not understand finance and are afraid to.
    Go to some large companies that offer employees a Definded Contribution Plan and learn what assistance they get in investing but never or seldom any advise on investing but yet the provider continues to receive fees or commission as long as the assets are on the books and may never offer one piece of advise. Employees keep paying fees that include commisons but no one is saying anything about the commercial side. Wonder why? Please Debbie spend some time to understand our industry that serves the individual investor and then comment when you have some real facts.
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