Recent conversations with advisors has WP wondering why so many keep mentioning the HST, a fee that’s been a part of mutual fund costs for several years now.
Perhaps CRM2 fee disclosure rules have something to do with it but advisors are vocalizing this unhappiness with the 13 per cent addition (Ontario) to the MER of mutual funds.
“It’s all about taxes and anything they can tack on. Every time I get billed for something there’s the HST,” says Michael Gentile, president of Personalized Investment Planning. “You go to the gas pumps, if the cost goes up, the HST increases. Mutual funds are no different.”
Gentile is concerned that compliance issues are driving up the costs of operating an investment business in Canada and HST will be a big part of that. If you go to a fee-based account and embedded compensation is eliminated the government is going to lose out on a whole lot of taxation unless the provincial and federal governments increase the components of the HST to make up for any shortfall.
However, some advisors don’t seem to have a problem with collecting HST.
“Our management fees have HST taken off as well,” says Brent Vandermeer of Hollis Wealth in Ottawa when asked about clients and their feelings about taxes. ”I think people have a bit of tax fatigue. Something to the effect of ‘They’re taxing that too.’”
While the client generally doesn’t mention the HST when discussing fees, Vandermeer likes it from a business perspective.
“From my perspective I really like it. We get paid the HST and then have to remit it. All the HST I pay on my operations, called input tax credits, I don’t have to remit that, which reduces what I have to pay in tax,” says Vandermeer. “It’s actually been a help to my business as opposed to before when it was sheltered within the mutual fund and the fund company would get the benefit.”
So, when fee-based advisors bill quarterly, they could be ahead of the game when it comes to HST.