A lawyer-turned-portfolio manager has publicly decried complaints against CRM2 disclosure rules
The best defense is a good offense, as they say. The adage is often quoted in the context of war and sports, but it applies even in more mundane clashes–such as debates over financial regulation.
As many advisors continue to rail against new fee disclosure rules imposed under CRM2, National Bank Financial Portfolio Manager and former lawyer Rob Tétrault defended the measure by attacking its critics in a BNN video report.
“[I] think there are a lot of clients that are in for a big shock because if you have an A-class mutual fund that pays a trailer, people don’t see that, and there’s going to be a big, big change,” he says in the video. “Specifically, some of the smaller IIROC firms–or I would say, perhaps people who haven’t been disclosing their fees–are going to have major major issues.”
Tétrault explains his point by contrasting his previous industry with his current one. Lawyers have a fiduciary obligation to work in their client’s best interest, and he says it does not exist for investment advisors.
“In our industry, unless you are a PM, a portfolio manager–and there’s less than 10% of [people in our industry] that is a PM–the advisors do not have an obligation, which means there could be double-dipping in fees,” he says, before correcting himself: “There is double-dipping in fees.”
When asked why there’s so much pushback from the industry against applying the fiduciary duty to advisors, Tétrault asserts that the opposition’s argument is not solid and is just motivated by resistance to change.
“[C]hange is difficult… it needs to happen in our industry. We need to be more transparent. We need to be acting in the best interests of our clients. Why would we not?”
He elaborates by questioning the practice of the deferred sales charge, “an upfront commission in exchange for locking in someone for a period of time”, which he says has been banned at National Bank and other banks.
“If we ever do something like that, we always do what’s called F-class: no load, clients see what they’re paying, they see it on their statement, they know what the advisory fee is, and there is no locking in of any kind. There’s liquidity. You can sell, and that’s important in this day and age.”
He also questions the incorporation of commissioned products in fee-based accounts.
“You’re paying a monthly management fee to your advisor for his advice and to trade the account, and on top of that we’re seeing commissioned products in there. To me, that has to end.”
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