Lawyer-turned-money manager emphasizes fiduciary duty

Lawyer-turned-money manager emphasizes fiduciary duty

Lawyer-turned-money manager emphasizes fiduciary duty 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.”

Related Stories:
CRM2 seen to expose fee-pocketing among discount brokers
Segregated funds need CRM2-like disclosure: Expert
  • Jim D 2016-08-12 12:48:32 PM
    I believe good fee disclosure is a must if you want to call yourself a professional. In my opinion, CRM2 attempts additional disclosure for a consumer that is already time starved, over-subscribed with disclosure, jargon and all too frequently - uninformed planning decisions. I am saddened by what I see as a further commoditization of financial advice and planning. Consumers need a lot more help on making sound financial planning decisions for the present and the future. There will always be a need for the transactional investment relationships that emphasise the lowest costs, but do not confuse this with comprehensive financial planning advice. Full disclosure serves everyone.
    Post a reply
  • 2016-08-15 10:21:05 AM
    There is no such thing as Fiduciary advisors. Or Lawyers that say they are Fiduciaries.
    Just because you tell a client what you are charging them does not make you a Fiduciary.
    If I tell a client exactly what I charge (say 1.2%) and another advisor charges imbedded trailer fees at 1% how is the advisor charging a trailer fee hurting the client. It's actually the so called fiduciary that is charging the client more. How can a client that is being charged more be in the clients best interest?
    Post a reply
  • Debbie 2016-08-15 3:37:15 PM
    Transparency is just plain decency. The duties of a fiduciary include loyalty and reasonable care of the assets within custody. All of the fiduciary's actions are performed for the advantage of the client. The client's interests are paramount and conflicts of interest are avoided. When handling the hard earned savings of Canadians a fiduciary responsibility should be front and center.
    Post a reply