Wealth Professional forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Notify me of new replies via email
Wealth Professional | 08 May 2015, 08:48 AM Agree 0
The rank and file continue to defend DSC funds as the only way average Canadians can get good holistic advice.
  • Terry Partis | 08 May 2015, 09:51 AM Agree 0
    I agree wholeheartedly, with one exception. I feel the low load option is better for both the client and advisor. It allows me to be paid a smaller up front commission, that allows me the time to do proper initial planning for the client. It also only locks the client in for typically 2 or 3 years, to avoid having to pay back any portion of that up front commission.
  • Steve Scatterty | 08 May 2015, 10:31 AM Agree 0
    Will. Quite the provocative headline. Was it your intention to make the statement that all DSC opponents are elitest advisors? or that all Elitest Advisors are DSC opponents?
  • Tony Battista | 08 May 2015, 10:38 AM Agree 0
    The use of DSC has a special role in our practice. You use it with respect to the timetable of the client's profile. If you start an RESP for a child you use the DSC up to a certain age, you transfer 10% every year, than at age 15 you go low load or front end making sure there are no fees on redemption. I agree with Mr. Flannigan, you cannot generalize and mix the treatment of the small account and the big one. Sometime we spend more time with the smaller investor than the bigger one, and if we charge according to time dedicated to the client, he could not afford it.
    What would happen when a client would delay paying fees or not paying at all? We will be chasing the clients and taking them to small claim court? Why few advocates want to change what is working perfectly for thousands if not for millions? The bottom line is: can Advisors provide solutions, discipline, tax savings, savvy counselling for the clients?
  • Dave Watson | 08 May 2015, 10:53 AM Agree 0
    DSC Fee structures are important, when running a practice with multiple employees and offices overhead is a real problem. Having some DSC revenue allows the cash flow to fund such practices. The client is well served with access to quality service and advice. Without the ability to generate cash flow we may lose these offices and that will not be a service to the clients. These changes give the banks the strategic advantage over the independent advisor.
    lots of great advisors require these revenue sources to keep the lights on and service their clients.
  • Ken MacCoy, CHS | 08 May 2015, 11:41 AM Agree 0
    I've followed this ongoing debate about fees vs commissions (mainly DSCs) with interest. And while I can appreciate why both sides are so adament in their views; I have Questions:

    How many of these same advisors only write money business? Are they life insurance licensed? If yes, do they (or an associate) also handle the life, disability, critical illness insurance needs of their clients? If not, who is handling your client's insurance needs ...the competition? and why are you leaving money on the table?

    My point: Is it possible that if you (also) provided your clients insurance needs either personally or via an associate, you could then afford to go the 'fee' &/or 'low-load' route on the investments?

    FYI - I'm a life insurance broker whose money business is handled by qualified associate(s) with a minimum of a CFP designation & 25 years or more experience.
  • Will Ashworth | 08 May 2015, 11:51 AM Agree 0
    Interesting observations, Ken. Keep the comments coming.
  • Ross Birney | 08 May 2015, 01:04 PM Agree 0
    Will - very bad title. It simply provokes conflict, which I hope was not the intent. Also, most DSC schedules last 60 months or more, not 24.

    Ken - exactly. If DSC advocates were fully licensed and able to properly serve their clients needs they would not be one trick ponies relying on a single product to supply the income to which they feel they are entitled.

    DSC advocates - The people who have only $25/month to invest are the most likely to need their money within 5 years due to cash shortfalls. Are you really doing them any favours by penalizing them with DSC fees at a time when they need their money the most?

    Wouldn't those clients be better served by a salaried advisor or discount brokerage firm? I think you do a disservice to all those salaried advisors whose skills have improved significantly over recent years. If these people's best interests were truly at the forefront you would refer them to lower cost alternative sources, not trying to figure out how to generate fees from them.

    If a client is not willing to pay the amount of fee you charge that may also have something to say about the value they perceive in your services.

    Mr. Flannigan - Does the $1.25/month you make from the $25/month clients really make that big a difference in your life to justify locking them in for 5 years? If this fee is truly justified as compensation for preparing their financial plan, how complicated can that plan be if all they can afford is $25/month and how long are you taking to prepare such plans?

    If DSC fees are justified to compensate for the upfront work DSC advocates feel they are entitled to, then why are all subsequent purchases of investments also placed in DSC mutual funds? Hasn't that upfront work already been paid for?

    DSC advocates say "Don't mess with DSC fees because they have worked fine for many years." Well, history is full of examples of egregious behavior that was accepted as "fine" until the population became more enlightened.
  • Mark | 08 May 2015, 01:11 PM Agree 0
    Shouldn't we be discussing the client's investment time horizon and their goals, and then determine whether to go no-load (front-end zero), low load or full DSC? And if the clients have the net worth to go to a fee for service account, then you can do that. And do the no-load funds have the same MER as the full DSC? And aren't the trailers usually higher for no-load funds in comparison to DSC funds? This conversation needs a lot more discussion with the focus being on what is best for the client first and then can the advisor be reasonably compensated for the work he/she needs to do for that client.
  • Mcat | 08 May 2015, 04:53 PM Agree 0
    What about Junior advisors starting out? How do they survive without DSC commissions when they may have 1-2 million in assets under management. These younger advisors are also dealing with clients that have small amounts to invest but need a lot of advice. As mentioned above DSC or Low Load has its place and should be left alone so clients can still get the advice they need, big or small.
  • Linda Spletzer | 09 May 2015, 04:31 PM Agree 0
    If full disclosure of costs is truly what this debate has been about,CRM2 has covered that. Controlling how we charge clients would be nothing more than a power play.

    My clients are, and have always been, fully informed as to their options including the pros, cons, and costs of each choice. I have some front end, some DSC, some LL and some fee based accounts in my book. I discuss each with every new client and together we determine which is the best choice for them.

    What more could the regulators ask for?
  • Murray Schultz | 09 May 2015, 05:32 PM Agree 0
    Since client emotions are likely to put them in a poor position, in terms of trying to time the market, it is better in many cases to have at least a portion of the client's portfolio in DSC - the longer-term portion, of course. This regulator-driven vilification of a simple mechanism, which allows the funds to pay the advisor for client stability, is pure elitism on the part of the regulator. Seems they have forgotten who they work for (the people) and are prepared to cut off their nose despite their face. I think we have more than enough regulation to deal with those few financial advisors who attempt to skirt the rules. This is something that the regulators know only too well. Therefore I ask: are they trying to make their job easier or protect the clients from a fee structure that is, in fact, paid by the mutual funds?
  • Will Ashworth | 11 May 2015, 12:29 PM Agree 0
    You make a good point that any new money from a client after their initial deposit could be put in 0% FEL along with the 10% annual free units.
    While the debate rages about whose compensation model is best, very few have questioned the fund companies' take, which is easily a majority of the MER. Do they not have a part to play in this?
  • Allen | 12 May 2015, 01:44 PM Agree 0
    I can't believe this headline. Garbage. So tabloid-like. So provocative. I wonder if Will Assworth has ever tried advising. What a waste of reading time. This publication should fire this writer. I would be on your "do-not-include" list.
  • Steve K | 12 May 2015, 05:02 PM Agree 0
    Any discussion of fees - in any form - is actually a discussion of revenue. A discussion about fee reduction is a discussion about revenue reduction. Regardless of how fees are charged, a certain revenue target must be met by our industry in order to sustain the manpower we have in place. Without fees there is no revenue. Without the revenue, our workforce shrinks. Therefore, a discussion about fee reduction is actually a veiled discussion about shrinking the number of bodies we employ.

    I say "veiled" because, in my view, any disagreement over fees is actually a disagreement about value. Opponents of fees tend to promote low-fee options such as ETFs, robo-advisors, and self-directed accounts. While these products and services have their place, a blanket endorsement is ultimately a rejection of the value that a human provides to many advisor-client relationships. I believe that fee opponents don't see or believe the value and, therefore, can't justify in their own minds why a client would pay any fee for something that they deem worthless.

    Anyone reading this thread will have had the opposite experience, as nearly any advisor who has sat with even one client can attest. But I think it is important to keep in mind that the real battle is not of cost but of value.

    If it was possible to agree that the value is there, then the question shifts to "what is a fair exchange?" Not only in the amount - which is a balance between an attractive enough compensation to retain the advisor and a cost that is not so exorbitant that it negates investor returns - but the method, such as DSC for small accounts, etc. A relevant parallel to consider is tax revenue. Right now, our nation's political parties are embroiled in campaigns promoting this or that method of redistributing taxes. It's worth noting that any discussion of the intent of tax law is to force high income earners to pay more than their share, as opposed to a flat-tax or even a capped-tax model, although our industry has to contend with competitive forces which the government does not. But whatever the method, the overall goal is to generate a specific amount of tax revenue in the most "fair" manner. In the presence of value, this should be our goal, too.
  • Ken MacCoy, CHS | 13 May 2015, 02:58 AM Agree 0
    This subject has generated some heated discussion over the past couple of weeks.

    However, craven personal attacks are not 'Professional' and should be banned.
  • Will Ashworth | 13 May 2015, 09:10 AM Agree 0
    Steve, thanks for the great comments. This is a very touchy subject for sure but you've managed to present some very compelling and intelligent arguments. Keep them coming.
  • Rick Hewat | 14 May 2015, 10:56 AM Agree 0
    Seems there is very little discussion about giving the client the choice - fee based or via a management fee trailer model. The issue at hand is one of disclosure. I don't see many clients that will enjoy having to pay the fees seperate. As well, any smaller accounts will become marginal under the new model. To me, regulators are attempting to make the decision for the client. The days of clients not knowing via lack of info are gone. Any person can find out detailed info on investments via a simple Internet search. The choice should be up to the client which model they choose.
  • Will Ashworth | 15 May 2015, 11:53 AM Agree 0
    Rick Hewat,
    We have written about choice in the past and will continue to do so in the future. Many advisors have expressed to me this exact point. You're definitely not alone when it comes to being pro-choice.
    Thanks for the comments.
Post a reply