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Wealth Professional | 11 Apr 2016, 08:15 AM Agree 0
Wealth Professional speaks to leading financial advisors to ask them where they stand on the commission ban question
  • Gordon Stovel CFP, RFP, CLU, ICD | 11 Apr 2016, 10:12 AM Agree 0
    DSC's should be banned, as the real facts are seldom disclosed until it's too late, (or after the fact), when yet another investor gets a permanent bad taste in their mouth about the industry. Trailer fees, or SERVICE FEES as they should be called, are there so that the advisor can afford to continue to give the client the advice and service they need over a portfolio's lifetime.
  • John De Goey | 11 Apr 2016, 10:28 AM Agree 0
    Gord, How can you possibly refer to trailers as "service fees"? Discount brokers receive them - and absolutely insist on offering no service or advice. Please call them what they are - commissions.
  • CG | 11 Apr 2016, 10:50 AM Agree 0
    In a world where we have a over abundance of government controls it should be noted that professional proficiency is the priority. How someone is compensated should be public opinion through proper education. The real issue is that once you pass a test you can call yourself a financial advisor so let's get the fundamentals right and go from there.
  • John Kehoe CFP FMA CIWM | 11 Apr 2016, 11:02 AM Agree 0
    I think that much of the handwringing about CRM2 and a commission ban is driven by advisors' sense that what they provide isn't worth the trailers clients have been paying. There is likely a high correlation between opinions about a commission ban and opinions about CRM2: both would help to illuminate the cost/benefit of their services - for good or for ill.
  • Marie DeLauretis | 11 Apr 2016, 11:42 AM Agree 0
    Dear Colleagues,
    Personally, I am waiting to see the results once the dust settles. Once July comes, things will get interesting.
  • Tony Katarynych BSc,CFP,CLU,CHFC,TEP,FMA,FCSI,CPCA | 11 Apr 2016, 12:21 PM Agree 0
    Look, the fundamental question here is whether or not you want the public to see you as a true professional or not. My answer is a resounding YES! Therefore, as a profession, we need to dump all the sales incentives (contests, trips, etc), we need to be completely transparent when it comes to how we are compensated and we need clear regulations as to who can call themselves financial planners. So a fee-based platform is the best. We provide a list of services and a fee schedule up front. Plain and simple. As a consumer, you have the right to know what you pay in order to receive the benefits (services, advice). Only then can a consumer make a judgement on the value received. So, yes let's ban commissions and move on to more important things. It's absolutely ridiculous that anyone can call themselves a financial planner!
  • Gord Stovel | 11 Apr 2016, 01:21 PM Agree 0
    First comment is to John DeG, if discount brokers receive them, perhaps in all transparency they should discount them in the MER upfront.

    To Tony, if this is true, then doctors and dentists should be just as professional and they aren't. My sense is, if every single time you provide service or advice, you need to negotiate the price you are also negotiating the perceived value. Many times the perceived value of advice may not be realized for months or years downstream. Until the client actually experiences the result, they may not perceive its value. In fact, I would suggest, regretfully due to fiscal ignorance most will not. Relationship is being negotiated at all times.
  • Mike Gentile | 11 Apr 2016, 01:57 PM Agree 0
    There is no such thing as a free lunch unless of course you believe in the tooth fairy. I also believe that transparency is fair and reasonable. I am just not sure how many people are prepared to pay up front for advice in todays very complex financial environment with in excess of over 16000 funds to choose from.
  • Nina | 11 Apr 2016, 02:37 PM Agree 0
    When banning fees/commissions you are taking away the services that can be provided to the smaller investor. I have clients that have started out small and with guidance are some of my larger clients. By going all fee base there are some advisors charging 2% or more for their service ? Is that fair from us getting paid from the fund company a max. trailer of 1% . I think not. The fact that the banks will not be disclosing their fess is unfair, you will see many clients flee to the banks and not get the service . Clients should have the right to choice and I do explain how we get paid.
  • John De Goey | 11 Apr 2016, 03:50 PM Agree 0

    Perhaps Discounters SHOULD take reduced trailers, but since they don't, I believe the least anyone can do is refer to them accurately. Calling a commission a fee does not make it a fee.


    Please provide proof. Where are all the small investors who cannot find an advisor (as you imply)? Also, R U suggesting that robo advisors are not advisors, because they have really low minimums.
  • John Kehoe CFP FMA CIWM | 11 Apr 2016, 03:50 PM Agree 0
    Part of my point is that most smaller investors are probably not getting adequate advice right now, so I don't think they have much to lose in this transition. Also, the last several comments seem focused on investment which, I think, is endemic to the financial services industry. For people to receive good advice, it should by definition cover much more than investment.
  • Brian Shumak, B.Sc., CLU, CFP, TEP | 11 Apr 2016, 03:55 PM Agree 0
    Do we really need to speak in absolutes? I find it odd that one would attempt to impose their views of compensation on another advisor let alone on the consumer.

    There is merit to both fee-for-service and commission. There are as many success stories for both and as many unethical situations with both means of compensation.

    Dictating how an advisor charges for their services removes the freedom that we have as advisors. We should be very careful about allowing the government (regulators) to dictate what is and what is not okay.

    We have seen how things have progressed in the UK and Australia. Whether you are for fee only or commission only, I would hope that you can agree that we do not benefit as a financial community to follow either of those paths.

    Would it not make more sense for us to join together to fight against the removal of our freedom to choose as advisors? Do we really want the government (regulators) to tell us what to do? If they say no more commissions, how long until they say what amount of fee we can or cannot charge and then both sides lose?

    The protection of the consumer should be paramount for all of us. That should mean that we all argue for the best form of disclosure so that the consumer can make an educated decision - and that does not negate fee only nor commission only.

    As the cliché goes, "Be careful what you ask for."
  • Tony Katarynych BSc,CFP,CLU,CHFC,TEP,FMA,FCSI,CPCA | 11 Apr 2016, 04:12 PM Agree 0
    It's good to see a healthy debate on this as it shows that we are all concerned, and rightly so. I would add that it is never about price but always about value. And yes, to Gord's point, we are always having to show the value that we provide currently as well as the value that we have brought to the client in the past as they quite easily forget. It's unfortunate that the usual yardstick is performance...that's the easy way to evaluate an advisor for an unsophisticated investor. And it's easy for the media to sell their agenda based on the crisis of the day. I do believe that you can build a transparent pricing model that will serve the smaller investor and still be profitable. Change is always difficult. Nonetheless, change is coming and I have always found it better to be proactive rather than reactive. You make your own choice.
  • Wealth Advisor | 11 Apr 2016, 05:00 PM Agree 0
    @ John
    Dan Hallett wrote an excellent article about service fees going to discounters. Service fees have to go to discounters because the fund industry lost the law suit. For us seasoned veterans that go way back, DSC replaced the lofty 6% to 8% front-end loads of the 1980's. However with FE=0% currently, DSC is dying a death of neglect and will either expire on their own or wait for the final coup de grace.

    My solution is to replace embedded service fee "trailers" with capped embedded AUM fees, get rid of DSC, low load and front-end loads. An investor can then, choose to be billed separately or have his disclosed AUM fee built-in to the price of the product - VAT style. All AUM fees built-in or not would be of course, negotiable. Hopefully, the CRA will continue to allow tax deductibility of fees for non-reg accounts. For registered accounts - you are out of luck as you may not charge registered plan fees to a non-registered account.
    Which is a good tax question. Which is better for the client: an embedded fee or a separate non-tax deductible fee?

    What if the annual AUM fee is higher ( quite likely) than the existing trailer for a fixed income account? What is the best interest for the client; a high fee or a low commission?

    For those advisors that prefer pay-as-you-go hourly fees or prefer U.S. style retainers, I see no reason why Dealers would not accommodate such practices.
    Bottom line, commissions work better for some of my clients and fees work better for others which suspiciously sounds very much like the current system we have now.
  • John Kehoe CFP FMA CIWM | 11 Apr 2016, 05:43 PM Agree 0
    The advisor-client relationship is weighted too much in the advisor's favour. I suggest that most retail investment advisors' conduct is below any reasonably acceptable standard of care. They don't disclose risks, alternatives and expenses adequately, and they are subject to commission bias. If it weren't so, the commission model would be seen to be more fair and effective by the public and the regulators - not by advisors only. Yes, there are commissioned advisors who do very well for their clients, but I think they are the exception rather than the rule, which is why this is being addressed at the regulatory level.
  • Meredith Swanson | 11 Apr 2016, 05:48 PM Agree 0
    It seems to me that it is difficult enough to have an inexperienced investor (and there are lots) to answer all of the questions in a kyc. Prior to that decide whether your fees are competitive enough or should he/she check 12 other advisors to see who will give him/her the best rate. Add to that, does the one with the best rate provide the best service or should he/she try the middle one, etc.
    It is already difficult enough to help the client to decide what direction they want to go without confusing them even more with whether the fees are ok. Be transparent for sure but let's just keep it simple.
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