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Wealth Professional | 21 Aug 2015, 08:15 AM Agree 0
With more and more myths floating around about DSCs, supporters of those funds are now fighting back against industry players wanting to kill them off
  • Brendan Donahue | 21 Aug 2015, 10:05 AM Agree 0
    Not only is Susan McArter out of touch defending DSC fees, she exemplifies her ignorance stating that in the IIROC world there are fees incurred every time a change is made.

    This statement couldn't be further from the truth. But I guess when you live in a world where locking up a client into funds for 6-7 years so that you can be paid 5% is somehow "in the best interest of clients" rather than using a low-load structure that locks a client up for 2-3 years and you get paid 2%, or using a no-load structure and collecting 1% per year, what can you expect?
  • Sarah Holland | 21 Aug 2015, 11:20 AM Agree 0
    A couple of nit-picks:
    * Shouldn't that be "Clients can incur unnecessary fees if an advisor moves investments from one DSC fund FAMILY to another FUND FAMILY before the DSC schedule has matured"

    * IIROC advisors can use mutual funds, so it's in the stock/bond/ETF world that every time a change is made a fee may be paid.

    * I had understood that one can take out 10% a year from a DSC fund, not 1% a month. It is nearly 1% a month.
  • Ross Birney | 21 Aug 2015, 12:30 PM Agree 0
    These are the same old tired defenses we have heard many times before. They simply don't stand up to scrutiny.

    There are a great many legitimate negative issues in regard to selling funds on a DSC basis, none of which would exist if the clients' interests were put first and the funds were not sold on a DSC basis.
  • Ken | 21 Aug 2015, 04:33 PM Agree 0
    The DSC share of the fund marketplace has fallen sharply in recent years. Now, let's finish the job and eliminate DSCs altogether. DSC funds were an irritant in years gone by, but in today's fast-changing financial world they're potential wealth killers that should be avoided.
    The standard investment industry justification for deferred sales charges is that they provide an incentive for investors to stay in their funds for the long term and not make self-destructive moves in and out of the market.

    There's some validity to this because investors do hurt themselves by jumping in and out of the market too much. But flexibility matters more. Today's market swings are unprecedented and some investors are discovering that they - and their advisers - have taken on too much risk. It's unacceptable to have to pay charges of up to 5.5 per cent simply to adjust a portfolio to make it more livable.

    Look to the commissions paid advisers who sell funds to understand why the deferred sales charge option persists. Fund companies pay advisers who sell DSC funds a 5-per-cent upfront sales commission that must be shared with their firm. The adviser then receives ongoing yearly compensation -called trailing commissions - of 0.15 to 0.5 per cent..Today's professional advisors are wealth builders and hence don't use such a liquidity reducing investment.This is doubly true for elderly clients and retirees.
  • Bob White,CLU | 21 Aug 2015, 08:00 PM Agree 0
    The only people who say there are fees incurred in a DSC fee switch (with in same fund family) are either not in the financial world and not educated in the facts, Or they are those who want to disrupt business to favour themselves, or they are just pain stupid people, and should not be in the financial services business.

    Any newbie learns how DSC and LL and FE fee structures works. That is how they are compensated.

    Any time there is a seasoned advisor who is selling DSC is most likely they are not growing their business, they are churning for easy compensation, to the detriment of the client, and those folks need to be forced out of the business as they are lazy, bad apple vultures.

    That said younger advisors in the business need to earn a living, So why not have fund codes set up that the client never gets a DSC charge, if a DSC fund is surrendered the advisor gets a charge back. If they are doing good work and it requires they move to a different fund family, then they will receive new compensation to offset the charge back, but the client is not harmed.

    It only takes a little intelligent thought and a lot of the crap that has been started by OSC desire to ban embedded compensation can be dealt with is a very intelligent and beneficial way to all parties concerned. With the exception of no need to import the bad talent from Australia to run OSC compliance issues - and a lot fewer of the 200+ lawyers in the OSC who's jobs would not be required.

    Novel, that would reduce fees.

    My opinion.


    Bob White, CLU
    member of Advocis since 1977

  • Tony Romano | 22 Aug 2015, 08:39 AM Agree 0
    It's about time that some truth comes out. The banks have even told some of my clients that they are paying a "DSC Fee"??? I think that there should be some form of repurcussion to these people that "misinform" people about the products and services of their competitors. This goes for the entire industry. We're all in business and want to thrive, but these practices maks the whole industry look shady.
  • Roby | 22 Aug 2015, 10:00 PM Agree 0
    One of the biggest consumer rip offs which has not been covered is that the industry allows an advisor who sells off a disc fund to rebate the cost and in turn place the client in a new dsc fund. For example an advisor recommends client to sell. 100k of funds with a dsc of 1 percent or 1k then purchase a new fund, and receive 5k less the 1k while locking up the client for 7 years. My last dealer allowed this however if I sold the client an fe fund at 0 percent with the client taking the 1k hint that was frowned upon.
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