Opinion: Commission bans would harm Main Street

Opinion: Commission bans would harm Main Street

Opinion: Commission bans would harm Main Street

The ban on embedded commissions in the UK has resulted in a shrunken advisory sector that is not serving small clients, argues Joanne De Laurentiis, president and CEO of The Investment Funds Institute of Canada. Canadian regulators should resist any urge to follow suit. Here's her argument.

Embedded advisor compensation is an important option for Canadian investors, given the unique aspects of our market. It should be preserved alongside the option of paying separate fees for advice.

The most unique feature of our market is the availability of advice to everyone, including small investors who might otherwise not have access to professional investment services. Public surveys have shown that almost 60% of Canadian mutual fund investors first go to an advisor when they have under $25,000 to invest; more than 40% seek advice with less than $10,000.

Average accounts are $35,598 for MFDA-licensed advisors and $67,078 in the IIROC channel. In jurisdictions such as the US, where fee-for-advice is the dominant structure, advisors have a declining interest in clients with smaller portfolios and some firms penalize their advisors for holding accounts below a certain size.

 



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4 Comments
  • John Rathwell 2013-07-04 9:16:24 AM
    If the government removed the embedded commissions I would have to lay off staff and stop taking smaller accounts. My clients don't complain now about fees, and this whole issue is going to create more harm than good.
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  • Isaac 2013-07-10 10:42:40 AM
    Imbedded commissions has as much effect on the value and effectiveness of a financial advisor's advice as the dental fee guide has on getting a good filling or a bad root canal. If the regulators want to protect the public from bad advisors, raise the entry requirements to the industry, educate consumers on best practices & increase disclosures.
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  • Peter B 2013-07-23 3:49:07 PM
    Embedded commissions are deceitful and dishonest. Transparency is the hallmark of ethics and perhaps some of the so called "Advisors" who lament removal of these fees will destroy their businesses should look at transactions from a Customers' perspective; Perhaps they would actually like to be informed of the fees their "impartial" Advisor is earning... better still - negotiate those fees. The old days of hidden and under-ther-counter commissions are gone - not recently either - long gone. Those who do not evolve will be put out of the industry - and for good reason. As Regulators struggle to grasp the impact of legislative measures to control the industry, the opportunity to self-regulate is almost lost - due to the bloody-mindedness of the last Brigade....Never ind they will all drift away, replaced by a new breed of professional fee-for-service Advisors who are not afraid to rely on their skills to provide long-lasting solutions to clients.
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