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.”