Randy Cass of Nest Wealth reveals limitations of CRM2 and why Canadian investors are paying far too much in mutual fund fees
It’s been one week since the third phase of CRM2 came to pass, bringing a great deal of discourse among the investment community about its merits or lack thereof.
Randy Cass, CEO of Canada's largest independent robo-advisor Nest Wealth, considers the measure a positive, albeit not exactly an absolute solution.
“CRM2 is a good first step, but it doesn’t give a total amount of fees being paid,” he says. “We now know the fees going to advisors, but that’s trailer fees and not MERs. It was our belief (at Nest Wealth) that if we created a tool to allow Canadians to know the total amount they are paying each year, it would make a big difference.”
That tool is a fund calculator which allows investors to calculate exactly how much they are paying in fees. The timing, coming hot on the heels of CRM2, means the issue was already a real talking point as the product launched this week.
“It was appropriate timing: we thought the industry’s attention would be focused on greater transparency on fees,” says Cass. “When we were sitting around as a company, we realized there still wasn’t an easy way for Canadians to figure out how much in total they were paying in fees.
How much in many cases is quite a bit indeed, with data from Nest Wealth showing the average Canadian household pays $323,654.40 in mutual fund fees over their lifetime. The fact that many of these people are unware they pay such a huge figure meant Cass and his firm felt they had to act.
“We asked how much the average Canadian pays each year in fees and the amount is staggering,” he says. “We can’t wait a year for these numbers to appear on statements – that’s tens of thousands of the average person’s savings. We thought the sooner we could release this tool, the better off they’ll be.”
It’s clear that ETFs and other investment vehicles are increasing in popularity as the fee issue becomes more and more prevalent. That being said, mutual funds remain the overwhelmingly dominant investment option, which should mean the drive for greater transparency in the industry will continue on long past CRM2.
“We still have about $1.4 trillion dollars in mutual funds in Canada versus less than a tenth of that for ETFs,” says Cass. “There still is an excessively large amount of people that might be unaware of the fees they are paying and the alternatives out there like ETFs.”
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