Yanking fees would be redundant move: IFIC president

Yanking fees would be redundant move: IFIC president

Yanking fees would be redundant move: IFIC president The recent proposal by the CSA to ban embedded mutual fund fees would likely be a redundant move, as key concerns around transparency and conflict of interest will effectively be addressed by CRM2 and by implementation of some of the targeted reforms proposed by the CSA in April, says the former president of The Investment Funds Institute of Canada.

“By the end of next year, every single person who has an account, whether they’re buying mutual funds or a range of securities, they’re going to get a statement that gives them two key pieces of information – here is how your account performs and in dollar terms, here’s what you paid your dealer,” says Joanne De Laurentiis, president and CEO of IFIC.

“The argument that people will know what they’re paying only if they’re in a fee-based account just falls away, it’s no longer true.

“Look at who in the industry is arguing that transparency doesn’t exist – they’re all fee-based advisors. You’ve got none of them saying, ‘Oh by the way, by the end of 2017, it’s pretty much going to be a level playing field where everyone, regardless of what they’re paying, will have that specific dollar number.’”

She adds that forcing a sudden banning of fees before the learnings of CRM2 can be absorbed will likely do more harm than good.

“Our point, when we saw the notice two weeks ago, was to say to the regulators, ‘you need to have a paced approach here, you need to learn a lot about what the reforms of CRM2 do once in place’. We are addressing the transparency issue, we are addressing the best interest question – let’s do those.”

De Laurentiis points to other jurisdictions that have removed embedded fees altogether – the UK, Australia and Netherlands – saying that actions haven’t panned out as regulators had hoped.

“When we observe what is happening in other jurisdictions that started with banning fees, they’re now having to go back and are making some of the changes we are talking about,” she says.

“In the jurisdictions that did ban commissions, they did not just focus on mutual funds, it looked across investment products, this is one of the oddities of the question the CSA proposes – that they will only update mutual fund fees, and we don’t think that’s appropriate.”


Related stories:
‘Clients want to hear from their advisors’ on CRM2
Removing fees to ‘knock hundreds of thousands of advisors out of business’
 
4 Comments
  • Steve 2016-07-21 11:59:23 AM
    Thankyou Joanne, finally someone has the audacity to point out the truth. You have hit the nail on the head. I have fee based and commission based clients, we work to find out which client is best served by which service. Having the choice allows me to better serve my clients, one by one, as opposed to treating them like a herd of cloned sheep.
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  • Niki 2016-07-21 12:00:59 PM
    I wonder how many people work in the Industry as a whole in Canada whose salaries/pay/commissions are paid from the embedded mutual fund trailer fees? This would definitely be an interesting number. I hazard to guess that it is far more than those who have lost their jobs/contracts in the oil industry over the past two years.
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  • Bob White, CLU 2016-07-21 5:42:29 PM
    Joanne De Laurentiis is a common sense lady. Thank you it is nice to see that there are people at the lead who have common sense thinking and not dreaming up schemes that keep them employed and causing excessive additional cost, which get passed along to the consumer and the advisors and dealers and fund companies.

    If I have said it 100 times I will say again, we as advisors must have our voices heard, unless you like being considered a crook by the regulators, being told that you are not worthy to hold out as a professional, as they want us all to hold out as mutual fund sales people.

    As a 40 year member of Advocis, I would say to anyone who is not a member, (not a certificate holder) of a professional organization such as Advocis, CA or law society and others were you pay a fee and follow the protocols of education, a professional code of ethics and practice, become a professional and stand up and say NO to the regulatory bodies wanting to make change that has little to no value to the benefits of our clients.

    Read the reports they have published to realize the lack of information, credibility of that information the lack of proper comparative measures for service and values.

    An example of comparing the sale of a life insurance product years ago in Indian to the sale of mutual funds in Canada today.. that stinks of selling crap to get across a message that has no purpose.

    Regulators gifting funds to advocacy groups, with no disclosure to the advisors who pay those fees!

    The bottom line is there is no reason to ban embedded compensation. But there may be need to modernize how it is disclosed and offered to the consumer.

    And those fee for service advisors are not fee for service in the true sense they charge a planning fee, there are only about 3% of all advisors in Canada who actually charge a fee only advice, Most are like me, embedded compensation of 1% to the dealer, if house hold assets are below $150,000, and for assets over $150,000 then 1% to the dealer as a fee for service.

    Guess what, same, just how the compensation is paid, and it is not commission, because every advisor can have a different grid based on productivity with the dealer, not with the fund company.

    Now that said there are dealers who say if you sell our proprietary product we will pay you more. I say the regulators should go after them, because now my clients returns are being reduce because I do not do business that way, and effectively this increases costs and reduce returns to all clients.

    As advisors we all need to ask the questions ;
    -why are you making the changes?
    -what advisors have you consulted?
    -what professions have you consulted?
    -what experience in the field working with -clients does the regulator's who are promoting these ides have?
    -how do you plan to fix the mess after it you determine it was a stupid move?
    _ how do you explain to the Finance minister of each province that you have just impacted a significant portion of small business in this country and there or significant job losses?
    -how do you explain to the Canadian mom's and dad's that they no longer can afford to get advise because advisors can not long cover the costs to service them.


    The regulators do not care what happens to mom and dad Canadian and the next generation. All they care about is a crazy idea dreamt up by the legal begeal's and guess what, those legal begal's get pretty decent salaries, and there are hundreds of them, and they get benefits. bitt of a comfloct, let's make changes just to make changes and we keep our jobs.

    Go to your political reps and ask what they know about this and why they are not doing something about it. The regulators are wagging the government dog, and it is about time that government represent the people, and small business, which we are both.

    Tell your MP's and LMA's how many people you employ, the staff, the office cleaner, the landlord, his staff, the folk who wash the office windows, who shovel the snow off the parking lots, the dry cleaner, etc. we impact may lives doing what we do, so do not be shamed into having to call your self a Mutual Fund Sales person, unless that is all you do in a bank.

    My name is Bob White, CLU. I am a member of Advocis Canada since 1977, I joined because I wanted be a professional and help people, follow a code of ethics and conduct, and I am very tired of those who real understand very little about who and how we do our jobs serving Canadian's.

    Again thank you Joanne De Laurentiis, for getting it right!

    -w


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