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.
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