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 | 05 Feb 2015, 09:56 AM Agree 0
The IIROC guys won’t be amused, with some ETF providers now rushing to reduce the already low cost associated with those investments.
  • Tony De Thomasis | 05 Feb 2015, 11:00 AM Agree 0
    The numbers above are misleading.
    The average fund fee class F in Canada is closer to the 1.35% range than the amount stated.
    Also many class F funds like DFA, Powershares and BMO ETF funds have mers closer to the 0.60%
    Add in trading fees and trustee or custodial fees and our fund fees as above in Canada are in line with the U.S. and ETF mer fees.
    Too many stories add in the advisory fee automatically when comparing fund fees
    The future belongs to the good advisory service provider - the funds will just be a product like a canvas is to the great artist
    Now it is the master artist who will be of true value and not the blank canvas.
    The average investor is still not quipped to be a great investor - no matter what product is issued. This is not due to any lack of intelligence or information, but due to their DNA disposition to handle risk-reward properly.
  • Kevin O'Brien | 05 Feb 2015, 11:16 AM Agree 0
    The craze in ETF's will falter when the next big fail happens in an index aka Nortel, Bre-x Investors love to save money - even if it means putting a blinder on in regards to quality and liquidity. The risk inside of some of the new micro indexes is way past the average investors risk tolerance. Let us not forget - ETF's are a portfolio building tool to take a temporary position in a country, index or sector with little regards to the quality of the securities inside the index. I agree that fund fees must come down further and that active management of securities must perform either higher than passive or provide some tangible form of value to the investor. Active share will be the next buzz word in the industry.
  • Will Ashworth | 05 Feb 2015, 12:05 PM Agree 0
    Both great comments.
    The fee debate certainly is an apples-to-oranges exercise. In many ways fee stats are as pliable as baseball stats. That's what makes this subject so frustrating.
  • Tony Battista | 07 Feb 2015, 02:15 PM Agree 0
    Must factor in the difference on volumes in USA and Canada, the Taxation, and the cost of doing business in Canada visa USA. This push toward changes will ultimately revert on the average investor.
  • Warren Miles-Pickup | 07 Feb 2015, 02:35 PM Agree 0
    Author loses credibility by quoting ETF fees without taking advisor compensation into account and comparing that versus A Series mutual funds. If your going to attempt an apples-to-apples comparison, examine management fees excluding advisor compensation and taxes to see if investment manager fees are too high in Canada. Mutual fund fees in Canada do need to come down but the vast majority of that will occur through CRM2 through a decline in advisor compensation.
  • Tim Affolter CFP CLU ChFC | 07 Feb 2015, 06:47 PM Agree 0
    When will everyone clue in that the advisory fee in the US is unbundled??? If you want to compare an actively managed POOLED investment to compare to a passive ETF, you will find that, without the advisory fee, the MERs are more like 0.95% for global equity and 0.65% for income. The advisory fee is a COMPLETELY different debate! I agree with Tony... either learn the components of the debate and present a proper comparison, or stay out of it!
  • Will Ashworth | 09 Feb 2015, 09:16 AM Agree 0
    You're all making good points.

    However, in the end, there is absolutely no comparison between U.S. fees - bundled, unbundled, 12b-1 fees included or excluded, or whichever way you want to look at things - and Canadian fees.

    They must come down to the point where all investors pay 1% or less for advice and product.
  • Warren Miles-Pickup | 10 Feb 2015, 11:04 AM Agree 0
    Why do they need to come down below 1%? Is investment and financial planning advice not worth it? Should a financial planning professional not be paid like any other professional? Shouldn't the market determine what is fair value for investment and financial planning advice?

    Many financial planners or financial planning firms provide substantial benefit to their clients through tax minimization, investment advice and estate and legacy planning. Those advisors or firms should be compensated fairly for the effort and education required to establish those plans and for helping their clients to implement them.

    Establishing a ceiling to financial planning or investment advice fees would be akin to determining how much a lawyer or accountant can charge for their services. The good ones can charge their fees because they're worth it.
  • Will Ashworth | 10 Feb 2015, 11:35 AM Agree 0

    You're absolutely correct that good practitioners are worth the price of admission. That said, economies of scale don't seem to apply in Canada to the extent they apply in the U.S.
    At some point the argument that our smaller population inflates the cost of services becomes a bit of a red herring.

    First Asset just brought out another fund-of-funds product at 0.90% MER including the 0.75% dealer service fee.

    Isn't the advisor's cut from the 0.75% fee enough compensation to allow for professional advice?

    I guess you don't believe it is. Others might disagree.

    Thanks for your comment.
  • Warren Miles-Pickup | 10 Feb 2015, 12:28 PM Agree 0
    0.75% is adequate depending on the services that the advisor provides and the size of the account.

    Having said that, the portfolio you've selected is almost entirely invested in Canada which we both know has a lower management cost than a portfolio that is diversified globally with deeper sector and asset class diversification. This could leave investors with substantially greater risk than they may be willing to take if the Canadian economy struggles or if rate increases occur in Canada before other developed nations.

    I agree that fees should be a concern for investors but it is merely a part of the consideration that needs to take when determining how or where to invest.

    We should not set an arbitrary limit on how much someone should or should not be paying in fees.
Post a reply