Industry buzz on fees revolves around choice

Industry buzz on fees revolves around choice

Industry buzz on fees revolves around choice Invesco Canada recently weighed-in on the Brondesbury Report’s examination of mutual fund fees. Central to Invesco Canada’s comments is the fundamental belief that any future regulatory moves on fees should continue to provide choice for Canadians.
 
“At Invesco, our position on advisor compensation has consistently been in favour of choice and transparency. Advisors and their clients currently have the right to choose the compensation model that is right for them, whether it is commission-based, fee-based or salary,” states Peter Intraligi, Invesco Canada’s president. “The study affirms Invesco’s position that regulators should consider allowing phase two of the Client Relationship Model (CRMII) to run its course before implementing additional policy reforms.”
 
The policy reform most vital to advisors clearly revolves around choice.
 
Some in the industry believe that trailer fees, the linchpin of the embedded compensation business model, have got to go. The argument from those who support a ban is that these fees reduce the overall, long-term performance of a client’s portfolio.  However, the Brondesbury Report does little to shed any light on this argument.
 
"It is not yet clear whether moving from commission-based to asset-based compensation will result in a net improvement in the overall return to the investor," states the report. "The net benefit for investors remains elusive."
 
Ultimately, client satisfaction results from advisors providing top-notch advice and service. The way fees are collected is relatively immaterial as long as the client is happy with performance and understands the amount they’re paying for that advice.
 
“When it comes to fees, nobody is talking about value – what it is and how it’s delivered,” says Ottawa advisor Bob Roby. “One cannot legislate pricing. Rates, however, can be capped and guidance provided by the firms in question.”
 
Invesco’s Intraligi agrees with the idea of capping commissions in order to eliminate any advisor bias that might exist due to higher commissions on certain investments. 
 
"If trailing commissions are capped at, for example, 1% for equity funds and 50 bps for fixed income, the perception of bias should be erased,” he said.
 
See More: DSC ban would kill two other options
 
5 Comments
  • Rick Hewat 2015-06-25 10:01:57 AM
    Fees, fees, fees. Funny how it all is based upon mutual funds and the like but no mention of GIC or Term Deposits. Why is there no necessity of reporting how much financial institutions make on GIC's? Give investors 1 to 2% and loan it out at 5 or 6% or more!! Also, compensation to branches added in. Some institutions get a free ride and make out like bandits on deposit based fixed income investments. Let's look at all investment types, not just some!!
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  • Susan McArter CFP 2015-06-25 11:42:38 AM
    I totally agree with the comments stated above. Clients should always have the choice. Any changes legislated should not restrict client options. What needs to happen in my opinion is we need a standard a level of excellence set. The FPSC who oversees all certified financial planner's with a CFP. designation has already set this standard for me and all of my fellow colleagues with the CFP designation. In my practice I have maintained relationships with all of my clients the same not just the ones with large portfolio's who can afford to or want to pay a fee for my services. In my opinion the regulators are focusing on one part of the picture in this debate. Education, disclosure, consistent meetings, goal setting, tax planning, risk management, estate planning, education planning, legacy planning are offered and provided to all of my clients. These services add immeasurable value to anyone and everyone who is in need. Removing trailers would force me to increase my fees the resulting in a large number of clients missing out.
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  • Bob White,CLU 2015-06-25 12:41:45 PM
    It is all about clarity of cost, and value of advice and results for the cost.

    Call it commissions or call it fees, same results if both are 1%. But when I hear on BNN a CEO of a planning/investment firm say that what it means is that clients with account less than 1,000,000 will pay a 2% fee, and clients over 1,000,000 will only pay 1 1/2% fee, it leads me to say "really". Be it 1% FE0 or 1% fee for service that I do for my clients, that is a look different cost, and I give huge value to my clients.

    So is it detrimental to have "hidden compensation" vs fee? In a short while all will be disclosed. Then lets wage the discussion of why clients are leaving advisors, probably because they do not see value for what they are paying for.

    On the point of capping trailer fees, yes, but they cap fee for service fees. They are all the same, they are the compensation being paid for service, just 2 different ways. If CRM2 says it is fully disclosed what the client pays, it is a no brainer, clients with gravitate to value for the fee.

    Could it be that the fear is the fact that in the "hidden" compensation model the relationship with clients is stronger an the fee for service does not support the value?

    Have full disclosure regardless of the method of compensation, and let the consumer decide. What I see is a system that keeps trying to change, what needs not to be changed, so that the regulators making the changes keep the jobs that they get paid very well for, and who have most likely never sat down and worked with clients they way advisors do. Often those who are book smart, are not so intelligent in real life smarts.

    Let's see the studies, the communications with the average mom and dad consumers, what concerns them what they need to help them in their financial planning, how they truly feel about how they pay for the services they get and the value they attach to the cost of service.

    From my involvement, I have not seen the studies done by regulators, or government, but regulators have alluded to doing studies, what is the fear of publishing them?

    When will government have the balls to stand up to the regulators and say, " hang on a second, these are our citizens you are messing with, prove this is better for them, and we will decide"

    My name is Bob White, CLU.

    I do both commission base and fee based with my clients and I am DAMN proud of the work I do.
    Stop the crap and let's do our job looking after Canadian Families.
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