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Wealth Professional | 01 Oct 2015, 08:15 AM Agree 0
Unless firms want to reach into their pockets to put young advisors on salary, DSC’s represent the best way to keep the banks from swallowing up business
  • Ross Birney | 01 Oct 2015, 10:09 AM Agree 0
    "Independent" does not mean DSC, as is inferred in the article. Far from it. I am with one of the largest, if not the largest, independent firms in North America. We didn't get to that size by mistreating our clients selling only mutual funds on a DSC basis.

    Young advisors need to treat their clients with respect by offering them a full range of products and services (stocks, bonds, ETFs, insurance, options, financial planning, etc.) and not rely only on a "one trick pony" of selling mutual funds on a DSC basis. Once clients become more aware of their options they will leave a salesperson, if not treated properly, for a more professional advisor. Then you're starting all over again.

    DSC fees most definitely need to go. The fair treatment of clients is long overdue.
  • Nick | 01 Oct 2015, 10:54 AM Agree 0
    This argument is complete rubbish. Consumers have been getting screwed from unethical advisors selling DSC mutual funds for years. It is high time that the regulators get rid of this ridiculous compensation structure that serves no benefit to clients.
    If it means fewer advisors - so be it. Most advisors are nothing more than unethical salespeople who lack the proper education and professional standards to provide financial advice anyways.
  • Vancouver IA | 01 Oct 2015, 11:01 AM Agree 0
    Yet again another article trying to justify the use of DSC's. In reality they dont have to be "eliminated" offically, that will be done unoffically by the new CRM2 disclosure rules. Its probably a pretty safe bet that clients wont be ok with paying 5-7% upfront commission when they see that in a dollar amount on their yearly statements. Its almost as if the clients wont be pleased with advisors putting their own interests before those of their clients.... wierd how that works...
  • Michael Hill | 01 Oct 2015, 11:53 AM Agree 0
    Hum- I wonder about this. To say it would kill independent firms is pretty strong. I'm not sure it will do that, but it will hurt new advisors who depend upon the higher incomes generated faster by DSC to start and maintain a new advisor business.

    This though is NOT a good reason to keep DSC. DSC should be kept only if and when it benefits both the client and the advisor and both know and understand why and accept why a DSC is being done.

    To say that clients should be charged more, or charged differently or charged a different load, because it is for a higher cause, saving independent firms or help new advisors start their business is wrong. Clients should not be charged for those reasons, they should have a charge because of the service they receive and agree to pay for, regardless of the manner in which it is paid, as long as the client understands and accepts the method of payment.

    If a lack of DSC income force new reps from the business or allows banks and large firms to pay salaries to new advisors, so be it- that's the way it occurs. We cannot and should not charge more or different, just to keep someone employed or a company running.

    When Walmart or Costco arrives in town, local retailers must adapt or leave the business. In the long run will this be good? Hard to say- it has not be great in the UK and some small clients may get no access to investment markets if DSC goes bye-bye, but sometime a good thing is replaced by a not so good thing, (Betamax) and we suffer for it later, but at least we are aware of why beforehand.

    My up front 2 cents worth.

  • Russ | 01 Oct 2015, 01:30 PM Agree 0
    Let me see if I understand the sentiment of this article correctly: "We need to retain an expensive compensation model that is notorious for gouging investors because, without DSC, advisors won't be able to earn a decent income." This is about as far from a fiduciary standard as I can possibly imagine.
  • Aaron Dorris | 01 Oct 2015, 02:22 PM Agree 0
    I agree with keeping the DSC fee structure. The DSC fee not only helps an advisor to stay in business but it also prevents clients from making a quick decision in moving there funds especially in a doward market.
  • Brian S | 01 Oct 2015, 03:18 PM Agree 0
    I totally agree with Mark!
    Starting in small rural Ontario in 1989 I have seen many New "Younger" advisors fall by the way side simply because their Income (commissions/trailers) doesn't offset expenses... being no different than any business, you can't succeed.
    However, today those expenses have grown faster than income. Taking a new advisor today, I believe failures are close to 90% in 1st 2 years... certainly one of the most risky occupations to start in. It takes 5 + years to become "Established" in this business and start being an above average income earner, and respected/recognizable advisor in your area. In Rural Canada, and also being a Newbie", most don't get those $100,000 sales... more like <$10000 sales. My rural business has many clients with assests under $25000 and they certainly deserve as mush help and advice as those with assets > $100,000.
    NO CLIENTS will pay me $200 + to invest $1-5000 a year, when now, my bill is $0.

    This is the other issue to discuss:
    After all, I would bet that there are more small investors in Canada than large ones. For once, shouldn't the majority hold more weight than the minority!!!!
    Hello Government !!! Are you listening
  • Ken | 01 Oct 2015, 04:31 PM Agree 0
    The advice industry needs to put investors first. The focus should be on the investor, not dealer Reps.Only then will it evolve into a profession rather than a sales channel. The days of "Mutual funds are sold not bought" are fading away.
  • Jim | 03 Oct 2015, 02:27 PM Agree 0
    I have 27 years in the fund industry and I have seen more abuse of DSC than I care to mention. As a result I have seen so much money lost by investors who could ill afford to pay the DSC fees but had no choice and had to with drawn some funds to pay some bills. DSC fees is absolutely no advantage to the investor and an article by some independent saying the fees need to stay is an article saying that I am not client focused but ME focused.
  • Curtis | 03 Oct 2015, 02:30 PM Agree 0
    At issue, in my opinion, isn't DSC funds, it is the lack of clear regulations when it comes to advisors selling DSC funds. This issue has come to the forefront largely because those who were sold DSC funds were not educated by the advisor that such funds have redemption fees and/or how much those fees would be if a fund was redeemed prior to maturity. DSC funds are a choice, they are not a mandatory purchase. If proper checks and balances were put in place by the fund industry I believe fewer complaints would occur. At issue are the advisors who aren't doing their job of informing and educating their clients about a choice to purchase an investment.

    I believe it is extremely short sighted to suggest that DSC funds are the issue, they aren't by a long shot. Holding advisors to a higher standard is the clear issue. Addressing the symptoms doesn't address the problem.
  • Gerald Curtis | 03 Oct 2015, 03:36 PM Agree 0
    It should all be about options - for both the service provider and the consumer - as it is for other services. If a DSC business model is what an advisor wants to offer a client, and clients are fine with that, so be it. If clients don't want to deal with an advisor who charges for his or her services that way, let them seek out a fee-for-service advisor or a "retainer" advisor or one that takes Canadian Tire money as compensation! Why should the government dictate what business model a service provider uses? Let the market decide whether a particular business model succeeds or fails. It used to be a free market economy, but it seems that freedom is increasingly disappearing, sadly.
    BTW, I rarely - if ever - use DSC anymore, but I do believe that the freedom for a service provider to offer whatever fee structure works for them, and let the clients decide to patronize that service provider or not. The information is "out there" these days and any consumer who avails of a service without researching their options and "shopping around" should know better.
  • BC Advisor | 03 Oct 2015, 07:57 PM Agree 0
    Aaron Dorris, if a client was invested based on a proper risk basis, and a discussion around risks, an advisor doesnt need to DSC to keep a client invested..clearly shows you put clients in higher risk products than they are comfortable with.
  • vancouver CFP | 05 Oct 2015, 11:33 AM Agree 0
    Don't know why some believe it costs the client more to go DSC. If they hold a fund 7+ years or so, which they should anyways to realize long term gains, the DSC is at zero.
    So it keeps the client invested, instead of chasing the latest fund.
    If "regular Canadians" trying to get started with an RRSP / Open investment only have the front counter at their local bank to obtain advice they won't get any advice. It will be the XYZ Bank balanced fund that Suzie at the front counter is told to push so that she gets to keep her job. The only people that will get true genuine advice will be the HNW individuals that everybody will be chasing so they can keep their business afloat. Sad.
  • Steve Scatterty | 06 Oct 2015, 04:30 PM Agree 0
    Will, once again your headline leans toward the sensational, I suppose to solicit or attract attention. My response is this. If you do a little more digging with IFIC I believe you will find that less than 25% (closer to 20%) of all Mutual Fund sales are done on a DSC basis. The majority of which is done as a Low Load. In spite of this the Industry, Independent and otherwise seems to be doing just fine. As Mark Twain might have said, "reports of 'the industries' demise are premature." That being said the DSC is a very useful compensation methodology for advisors' that are servicing young individuals or couples needing advice in the accumulation phase or clients that are having to start over and can't afford to pay fees up front. I do question Mr Birneys comments which equate DSC to not "treating clients fairly." I don't see the connection between choice in compensation methodologies being offered to clients being in any way connected to clients being treated unfairly. In fact, isn't more choice, more fair?
  • Will Ashworth | 07 Oct 2015, 12:57 PM Agree 0
    Steve, you're absolutely right. Variety is the spice of life. Thanks for your comments.
  • Jim | 07 Oct 2015, 04:56 PM Agree 0
    I too have been in this industry for 27 years and I too have seen clients who had to redeem some funds to pay some bills. The cost was out of this world. The trouble with leaving DSC fees whether you are rural or not is that they are abused by the advisor for their own benefit and not the clients. If new advisors need to get pay to stay in the business do front end loads where the client will see what they paid and agree to pay it up front. Most investors that I have spoken with were not aware of the penalty with DSC because it was not explained to them. No DSC isn't the problem the problem is the advisor.l
  • Steve Scatterty | 08 Oct 2015, 10:50 AM Agree 0
    With respect to compensation I would argue, “Choice” and “Clarity” are not mutually exclusive. I would also argue that “Professionalism” and “Choice” actually make for good bed fellows.
    Regardless of the compensation methodology clients are allowed to choose going forward, thanks to CRM2 they will have greater clarity of the cost of doing business with Professional Advisors, Planners, and Brokers in 2016 and will begin to redefine our industry by searching for greater value for the dollars they invest with us.
    I believe we are on the cusp of a Renaissance of Value and Professionalism in our Industry and I look forward to the day Advisors, Media, and Regulators can see past the present day saber rattling on compensation methodology and begin working more cohesively towards a common goal of increased Professionalism in our chosen field of Financial Planning and Advice.
  • Aaron Dorris | 13 Oct 2015, 01:28 PM Agree 0
    BC Advisor. It is unfortunate that you are afraid to provide your real name. Before I put a client into a DSC fee structure they are fully aware of all the options available to them and the cost associated with each. Fee's are discussed information is gathered to determine there risk tolerance and objectives.
    What investors ar being misslead about are the hidden fee's, and cost to have some one manage there money.
  • Jim Zoellner | 14 Oct 2015, 09:16 AM Agree 0
    Here is my full name as you requested, you can contact me at 250 385 1471/2232. I am not saying all advisor misrepresent the DSC fees. If the fees are fully discussed and agreed to by the client great it is their choice. Here are some examples I have seen. I ask a client once why they had two TFSA's with the same fund company. They replied that one was long term and one was short term. They did not know the difference but one was DSC and the other no load. Another client found his entire TFSA in DSC fees much to his surprise when he went to get some funds out to repair his roof. Another case same fund company. An 85 year old investor had all his funds put in a DSC funds. I am sure you will agree that these three situation where done for the benefit of the advisor not the client. I ask an advisor once in my own company why she uses DSC fees and what advantage there was to the client. She replied none but I have to get paid.
    Not all advisors are alike but for the most part it is my professional opinion that DSC fees are abused.
    • Troy Thornbeck | 06 Jul 2018, 06:59 PM Agree 0
      Fair comment. Do we ban mechanics, some of them are sleazy too. There is tremendous value in being honest and upright. TFSA's and RESP's, I never DSC, I FEL 0%. DSC on retirement accounts depends on age. LIRA's, what's the issue? The problem I see that is more relevant, is the client who has investments with the bank and hasn't been contacted in 10 years to assess his or her tolerances. The amount of money and strife that comes out of those situations is far more damaging in my opinion. Every four months the poor client has a new 22-year old advisor. Be honest. Have everything in writing. Write out your reasons and have your clients sign it. Do good work. Be honest. It's flipping simple. Lose the DSC, and you'll see all the business go to banks and online investment services (how they maintain compliance is beyond me). My 2 cents.
  • Gerald Curtis | 14 Oct 2015, 10:17 AM Agree 0
    I agree with Jim, above, that DSC fees are sometimes - if not often - abused, but that's a matter unethical advisors and lack of disclosure on the downside considerations of DSC - not the DSC model itself. DSC is seldom to the advantage of the client, but, if everything was done to the advantage of the client only, we wouldn't charge fees of any kind for our work, and we all know that's not practical.

    As I said in my earlier post: I seldom use DSC anymore, and if and when I do, it's in a situation where there is almost 0% chance that it will ever negatively impact the client. As with the case of the advisor in Jim's office: we do need to get paid, so, if trailers, only, aren't cutting it for an advisor, there are two choices: an upfront fee (in the way of either a front end load or a fee for service), or a DSC. If there is a better than 50% chance that the client will not need to access the funds in the DSC period, which is the better option - to pay the upfront fee and have that money "gone", never to earn them any return again, or a DSC setup, where 100% of their money is still working for them? In the case of the comparison of the FEL vs DSC, the mutual fund company doesn't charge any lower MERs for the FEL option, and the client is out the FEL % charged, so how does this benefit the client, should they not need access to the funds in the foreseeable future?

    If everything that wasn't to the advantage of only the client or customer in the business world were banned, what would be left? There has to be a balance between what's best for the client or customer AND what serves the needs of the provider of the goods or services, and I just don't think that what's best for the client is as clear cut as some here would suggest - that's all.
  • Philip C. Wild | 14 Oct 2015, 11:15 AM Agree 0
    Our industry does not need a "Rules Based" system which is what the regulators a pursuing. It says that if there is a problem, we fix it with a "rule" - Do's and Don'ts. If we actually consider that we are doing the right thing for our clients, then we ought to be demanding a "Principals Based" profession. I have developed a test spreadsheet of a simple $10,000 investment that earns 6% per year. If the investor invested under the traditional DSC structure or paid an FEL of 5% and then subsequently withdrew $5,000 after 1, 2 or three years, the client is better served with the DSC structure than the FEL. So it really isn't about the fee structure at all it's about developing a profession that will purge those that abuse the "Trust".
  • kathy Waite Your Net Worth Manager | 15 Oct 2015, 12:36 PM Agree 0
    DSC help small account holders get started with a RRSP but thats about it.
    It doesn't get them any cash flow advice or check they have an adequate emergency fund or disability plan. You can't do that for the trailer on a $100 pm PAC and $15,000 in account. Then they go to cash in the investment because they have no back up plan and find there is a DSC. ( of course market is probably down as well ) They signed 20 pages in the KYC thats says you have been disclosed so have no chance of a complaint being successful.
    DSC are not the problem its people without a plan and not being told the full details of what they sign up for.
  • kathy Waite Your Net Worth Manager | 15 Oct 2015, 12:41 PM Agree 0
    Philip Wild I agree with principals based, when you make too many rules some scumbag will always find a way round them.
    20 years ago I worked for Prudential in the Uk and we had a model for advice that was based on Maslows Hierarchy of Needs. You had to show you had checked out they were Ok with emergency cash , if died, if sick etc. had a plan to pay off debt. if they didn't you were expected to coach them on it. if they said they didn't want to listen to you you could do what they wanted but they had to sign off to show they had been educated. Most people slowed down and thought about what you said and actually did address the short term needs rather than just be seduced by the tax break on RRSP.
    Sure some crappy sales person would circumvent the system but it worked most times.

  • Jim Zoellner | 16 Oct 2015, 11:07 AM Agree 0
    CRM2 is it regulating the wrong thing? Seldom do my clients ask me about fees.. They want returns and if we charge them 2% and they get a satisfactory return are they concerned? I think not.
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