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Wealth Professional | 22 Jun 2016, 08:15 AM Agree 0
Though new rules to disclose mutual fund risk and fees were implemented in May, a standard way to measure risk remains a grey area
  • Ross Birney | 22 Jun 2016, 10:25 AM Agree 0
    There are numerous problems with the current state of "Fund Fact" regulation, including:
    - given that most Fund Fact documents are significantly out of date, some over a year old, the difference between the information discussed in a client meeting and that which a client reads in the Fund Fact will only cause further confusion.
    - since the requirement to deliver a Fund Fact is tied to the account level, not the client, any client who wishes to hold the same mutual fund in their investment account, RESP, TFSA, RRSP and spousal RRSP will receive multiple copies of the exact same document. A client is not better informed by receiving multiple copies of the same document.
    - I can't recall an investment scam ever that involved a mutual fund but can think of several that involved a stock. Which type of investment truly requires enhanced review and disclosure?
    - why the focus on mutual funds specifically? Why not segregated funds, ETFs, REITs, closed-end funds, etc. all of which have far more similarities than differences with mutual funds?

    The Fund Fact document still doesn't get to the root of "Risk" nor does it help a client in determining what Risk is and how much of it they are willing to accept.

    The new regulations appear more focused on CYA than actually helping a client understand their investing activities. Once again, regulators seem to be focusing on that which is EASY to address instead of what NEEDS to be addressed.
  • Wealth Advisor | 22 Jun 2016, 12:17 PM Agree 0
    DanH is exactly right. Using standard deviation means that a mutual fund smoothly declining to zero is a low risk investment. In my client conversations I point out that the FF risk measurement is merely the current level of short-term fluctuation -nothing to do with "risk" ( the loss of capital).
    Investor advocates have been targeting SD for a long time as well. Everyone agree this measure is not much value, perhaps even misleading; low fluctuation=low risk=safety!???
    We know better but the regulator is not budging. What gives?
  • Ken kivenko | 24 Jun 2016, 05:21 PM Agree 0
    Dan H is right on the money. The risk disclosure is not just of little use, it is actually misleading.Warren Buffet has said many times that volatility is not risk. CSA should pay attention.
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