New numbers are quantifying the kind of chop to mutual fund sales advisors may experience post-CRM2 implementation.
That new information from the Australian Stock Exchange paints a very vibrant ETF scene down under that’s flourished under the increased regulation and reform instituted by the government there. While it doesn't specifically track the decline of mutual fund sales, analysts rightly point out that any increase in ETF sales has generally come at the expense of higher-MER
The phenomenon has Canadian advisors looking at the Australian story as writing on the wall for their move through the same sort of reform process as their counterparts down under did a couple of years earlier..
“In Australia, a new regulatory mandate called the Future of Financial Advice (FOFA) highlighted investment fees and led to investors moving toward lower cost products. After the implementation of FOFA, the use of ETFs almost doubled, according to June, 2014, data provided by the Australia Stock Exchange. Over an 18-month span assets rose to $11.9-billion (Canadian) from $6.54-billion.”
Undoubtedly, say analysts, costs will become paramount for Canadian retail investors who up until now have proven relatively impervious to high fees whether we’re talking investments or cell phones. We’re really just a bunch of softies.
The elephant in the room, of course, are those exchange-traded funds. WP's Top 10 ETF Trends in 2015, which ran in mid-January, suggested that the competition in the ETF space would heat up in the coming year putting intense pressure on product manufacturers with inferior products.
No, we’re not talking about Vanguard or iShares.
As part of this increased competition a number of ETFs are expected to perish due to a lack of critical mass. If an ETF doesn’t have at least $10 million in assets under management after a couple of years it’s safe to assume it won’t be around by year three or four.