Fee disclosure taken to the extreme?

Fee disclosure taken to the extreme?

Fee disclosure taken to the extreme? If the CFA gets its way, advisors will have to prove to clients they’re on the same fee schedule as other clients of a similar size.

“The Statement of Investor Rights emphasizes the concept that the investor must always come first, and is a solid foundation for articulating and calling attention to the needs and rights of investors,” said CFA Institute CEO Paul Smith. “We are asking investors and investment professionals to share and endorse the Statement of Investor Rights to reinforce that commitment to fundamental ethical principles and strengthen a culture of ethical behavior.”

The CFA Institute’s call to action comes with 10 rights that every investor should enjoy. Fees, while listed eighth in its Statement of Investor Rights, are a big part of the current discussion taking place in Canada.

The organization, which oversees the CFA program, believes that every investor has the right to an explanation of all fees and costs charged by financial professionals including being shown that these expenses are fair and reasonable. 

Included in its discussion is the idea that similar clients (eg, two clients with $100,000 in equity investments) pay the same fees based on a readily available fee schedule, that those clients definitely don’t pay more, and where available, that they are provided with the fees and costs charged by competitors offering similar products.

“We aspire to build and lead the investment management profession; to do this we must continue to stand together for what is right, and in investors’ best interests,” said Smith. “All investors have the right to be served by professionals who act as stewards of their savings.”

In the opinion of the CFA Institute an explanation of fees is a big part of this stewardship.   
  • Tim Affolter 2015-05-01 10:41:12 AM
    I'm not sure that any business should be required to research and report what its competitors costs are to clients or customers. Who's to say that the products are similar enough to command an identical cost structure? Each company strives to have its points of differentiation, its unique value proposition. The CFA is going to have to reference (and possibly provide) some kind of objective, generic benchmark for this purpose (i.e.: the average management fee of a similarly asset-weighted pension pool or mutual fund in Canada) before this requirement makes sense.

    How can one business be expected to identify, evaluate and articulate the value proposition of every other competitor in its field? Isn't "shopping around," and deciding what we like or don't like in a product, our responsibility as consumers? Also, shouldn't the nuances of a company's products and services be obtained from the horse's mouth? To ask a competitor to objectively compare its product to yours, and inform prospective customers of its findings, is WAY outside the normal operation of the marketplace, imho.
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