By Tom Bradley

Dan Hallett published an article today about mutual fund fees and how they compare to the U.S. It puts some meat on a topic that so far has been laden with hyperbole. Management expense ratios (MERs) are a lot higher in Canada, but as Dan points out, the comparison isn’t apples-to-apples. Generally, Canadian MERs include a charge for financial advice, whereas U.S. MERs don’t. He refines the comparison by adjusting for advice and taxes.

The bottom line is that Canadians pay too much for wealth management. Higher management fees contribute to the difference, but there are other issues at work. Poor transparency has led to a situation whereby most people don’t know what they're paying, who it’s going to and what it’s for. That is turn means too many investors are paying for advice but not getting it.

As Dan says, the mutual fund industry “has its share of blemishes”, but the distributors, who keep almost half of those high Canadian MERs, also need to be held up to scrutiny.