Ronald Rusnak, president of Rusnak Financial, Ltd. in Bonnyville Alta., agrees that regulation needs to deal with all affected fairly. His beef targets the push to transition advisors from commission- to a fee-based model. Rusnak feels clients should be able to decide what type of advisor they want to work with, while believing that, in the long run, the retail client with less to invest – rather than the high-net worth, more sophisticated investor – will be alienated by the fee-based model.
“Once they see what the costs are, the clients should be able to choose which direction to go, themselves,” he says. “To switch from commission-based to fee-based, the smaller client won’t get serviced because they will look at the cost and think I’ve got to pay this out of my pocket, I’ll just go and take care of it myself…” (continued.)
“The bigger clients don’t really have an issue going one way or another … They know that there are costs associated with their investments. They understand that, whereas the smaller client doesn’t understand exactly what it costs to run an office and they look at the fees and say well I don’t want to pay those fees.”
Having said this, Rusnak – who is considering offering a fusion of fee- and commission-based services to his clients – feels regulation should force those advisors making commission fees to take a greater hit when fund values decline.
“There should be something in place so that everybody absorbs some of the loss because on a trailing commission, fund managers see a drop in the commission because the value of the funds go down, but it doesn’t impact them on the rate,” he says. “If they (regulators) turnaround and show that these guys are also taking a bit of a haircut at the same time as the client is, I think it would be easier for the client to absorb.”
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