Advisor: Ban on trailer fees would reduce clients by 1/3

Advisor: Ban on trailer fees would reduce clients by 1/3

Advisor: Ban on trailer fees would reduce clients by 1/3 Embedded-commission advisors could lose as much as a third of clients in their book if trailers are banned by the OSC, wagers one industry vet, herself preparing for that kind of attrition.

“I’m probably going to drop about 150 of them because I won’t get paid for my services and it’s not worth keeping them on as clients if I won’t get paid,” said Debbie Hartzman, a wealth advisor and financial planner at Professional Investment, forecasting losses to her book of about 500 clients.

Her comments come after the OSC suggested it would keep going with a review of embedded commission in the face of a panel report effectively asking it to move more quickly to ban the model.

Hartzman is already preparing for what many feel is that inevitable outcome. Still, advisors relying on embedded commissions nonetheless take umbrage with any move to implement a ban.

“It appears that the fee-only camp thinks everyone who uses commission is just a salesman, taking advantage of the public,” wrote one advisor in a WP forum last week. “Has there been any study done asking the public what they would prefer; monthly fee based on assets, embedded commission or fee based on service paid for either by commission or fee?”

Harley Lockhart, a wealth advisor with Quail Ridge Financial Services called the attack against commission-based advisors “illogical.”
Ken Kivenko is one who has been outspoken about banning commission and called arguments to keep commissions as “unprofessional.”

“Commission based advice has led to excessive leveraging, churning, DSC sales and adulterated KYC information with little emphasis on debt reduction,” the president of Kenmar Associates said. “Latest report shows Canadians have a record debt to income ratio right now. Advice giving can be a profession but major changes are needed.”

Unfortunately for some like Hartzman, however, clients will be inevitably lost as a result of a ban. Experienced advisors like her, who have been in the business for 20 years, might be able to adjust, but it’s likely that many will not, according to some advisors.
  • Dean 2015-03-17 11:07:38 AM
    Unfortunately we have people on the outside trying to regulate an industry that they have no idea how it works. In Canada it should be about choice and we have it today. The amount of money that is poured into the debate whether we have imbedded fees or fee for service is mute. Canadians enjoy the freedom of choice, which model fits them best today is in their hands not the regulators. Why take the options of choice away and regulate to one standard (FEE for service model) that the regulator in their ignorance feels one shoe fits all. It will be a sad day for Canadians should these bully's ever get their way.
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  • M R 2015-03-17 11:32:47 AM
    Another ugly "transformation" that appears to now be taking place is that a number of MFDA advisors are giving up their fund licenses, and will place all future client wealth holdings into segregated funds. Very surprised this has yet to receive any industry media attention, as I suspect many clients have little to no understanding of segregated funds and their cost structure.
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  • c k 2015-03-17 12:17:46 PM
    I totally agree that clients should be aware of the fees paid for service whether it is a commission, a trailer or fee on the amount of assets held under administration. I also agree that clients should have a choice as to how they pay for their service. Canada is a country of choices, to say that fee based fits all clients is wrong. What about the elderly million dollar client who does maybe 2 trades a year why should they pay 1% (10,000) for a fee when they could pay commission on those 2 trades and save thousands of dollars. The clients should be given CHOICES.
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