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Wealth Professional | 21 Apr 2017, 08:15 AM Agree 0
CARP members also call for an end to embedded fees
  • NPG | 21 Apr 2017, 02:19 PM Agree 0
    The problem with Best-Interest standard is , who decides what is the best Interest of a client.
    The regulator that is not trained, a client that is not educated, the advisor??
    who decides. Whenever this comes up people say yes lets have that. But know one knows who is going to decide. The answer is, its impossible to have. The free market will decide. People say get rid of embedded fees because its not in the best interest of the client.Well, what if the embedded commission is less then the fee for service, in that case its better for the client to have embedded fees. That kills that theory.
  • Garry Kopeck CFP, CLU, CH.F.C | 21 Apr 2017, 05:03 PM Agree 0
    To whomever came to these conclusions in regards to embedded commissions.
    As a financial planner for the past 35 years,CARP Member,and a senior I would like to comment on your advice to the CARP membership in regards to embedded commissions.My qualifications to comment are based on my following designations which hold me to the highest standards when it comes to dealing with my clients - CFP, CLU, CH.F.C.
    You state that most of your membership do not realize that there are fees attached to the products they purchased. This is simply rediculous! If there are such people out there then I agree that they have been poorly advised, but how do they think I get paid. And in that regard doing a poll with my clients and through many industry polls done on that subject more than 90% of those polled stated that they would prefer to have an embedded commission they agree to than an hourly or set rate that I would need to charge for my advice. As an example - I get paid .05% year to manage my clients accounts - which means their annual review ,any portfolio changes or rebalancing and to be there 24/7 for any questions or problems the client may have. On a 100,000.00 portfolio as an example that means I got paid 1000.00. If I went to that client or for that matter if your adviser came to you and said- Let,s settle my bill before we start and that will be 1000.00 how many do you think would actually pay like that? As all the polls taken on that question suggest - only about 10% and this would usually only be the higher net worth clients. This indicates to me that there will be a huge number of seniors on a fixed income that will not have the advantage of having a financial adviser when they need our help the most.The fact you mention that many advisers left the business when embedded commissions were removed in the UK only means that these advisers were usually newer in the business with a client base that could not or would not pay an upfront fee or senior advisers whose client base were on fixed incomes and could not afford to pay fees up front. Due to these reasons is why advisers had to leave the business. I would really like to know how YOU feel about the up front set fees you are asking your adviser to charge you for as long as you maintain a portfolio?
    One more point - You can say that people that don,t want to pay for an adviser can go on their own through robo advice or online trading to reduce fees- Well, there is a well documented study that shows when people used an adviser throughout their investing years they made 4X the amount as the person who did not use an adviser - and this is after fees. (The same embedded fees that you state are robbing investors blind).
    I have been a CARP member for a couple of years but I would hope that whomever is doing your research on such an important matter would get both sides of a story so that people could make informed decisions based on strong fact finding.
    A lot of the the planners in the industry by the way do not really care whether embedded fees disappear, as we will adapt, but what we do care about is that everyone has an opportunity to have sound financial advice. In that regard we believe that client,s should have a choice as to how they pay their fee,s to their adviser. Just getting rid of embedded fees will not solve anything , but just create a whole new problem of who will be able to afford financial advice in the future.
  • NPG | 21 Apr 2017, 05:24 PM Agree 0
    Garry, well said.
    I did a little study of my own clients. The first 40 that came in.
    something like 95% said they like embedded fees vs fee for service. I can tell you,
    these are real people with real money, not some make believe people that the CARP
    people invented.
  • CFP | 21 Apr 2017, 09:00 PM Agree 0
    Excellent summation Garry, as a CFP I completely agree with you. I am also a CARP member and took the CARP survey myself as well as screen shots of the questions asked. There was a lot of misleading information contained in the questions and the links at the end of it. To 'find out if your adviser is licensed' they only gave the IIROC link, nothing mentioned about MFDA, Advocis or FSCO. I noted my dissatisfaction with the survey in the comment section at the end and strongly recommended CARP involve actual Certified Financial Planners when they write these questions up in their ivory tower. CARP is doing a disservice to their members by misleading them and causing further confusion.
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