Removing fees to ‘knock hundreds of thousands of advisors out of business’

Removing fees to ‘knock hundreds of thousands of advisors out of business’

Removing fees to ‘knock hundreds of thousands of advisors out of business’ The real danger of discontinuing embedded commission fees wouldn’t just be a burden for mutual fund providers – it could potentially knock hundreds of thousands of advisors out of business, says a financial services president.

“If they remove these fees overnight – we’re not going to get a shift, we’re going to get a tsunami of people put out of business,” says Rino Agresti, president of Precise Financial Services Inc. “It’s incredibly unfair and quite frankly, it’s so un-Canadian. Are we that harsh?”

The Canadian Securities Administration’s recent proposal to open consultation on the removal of the fees has been a divisive issue in the industry. While some say the removal of fees will improve investor transparency, others argue it will actually limit advice options for customers with smaller accounts. Others claim embedded commissions effectively allow unethical advisors to hide in plain sight.

“The vast majority of advisors have not done anything wrong,” says Agresti. “The only people this will really help are those with big accounts – but people with big accounts, if they’re motivated, they have access to fee-based advisors right now. Why do the regulators want to help fee- based advisors increase their pool of clients? It seems like it will cause extreme bias in the system.

“And are we going to assume that all the customers that are displaced, they’re automatically going to find a fee-based advisor? I don’t think so.”

However, he adds it’s clear that commission fees do cause some bias and that he’s for the standardization of such practices in order to “remove that bias from the financial advisor community.”
“But like in any other business, there are fees, there are profit objectives on the parts of the promotors and sales people and in theory it’s the way business works in our society ,” he says. “But ok, let’s pick on the mutual fund industry for whatever reason.”

While it’s currently unclear how abruptly the CSA may make changes to commissions, Agresti says it’s important the approach be gradual to give advisors adequate time to adjust to a new market structure.

“I believe the biggest-growing segment of investment market is ETF market, so that’s already causing a substantial shift in industry,” he says. “But that’s ok because it’s a gradual shift.”
So, if the removal of embedded commissions isn’t the answer, what would provide adequate reform for the advisor industry? Agresti says harsher penalties for those actually misappropriating funds would be a more effective approach.

“I’ve been at this for 26 years, and the wrongdoing I’m seeing are unscrupulous advisors that misappropriate funds and the sentences they get are jokes,” he says. “They may get a jail sentence for a couple years and then they’re back out – let’s focus on that, I think the industry would back that up big time.”


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