By Tom Bradley

We try to limit how often we write about fees because we have an axe to grind (is more than 50 times a year too much?), but …

David, Chris and I have come across a few situations in the last two weeks that caught our eye. In each case, the investor had a larger portfolio (over $1 million), a balanced asset mix and was working with a commission-based advisor. And in each case, they were paying well over 2% per annum.

As we’ve pointed out on numerous occasions, fees are generally too high in Canada. The wealth management industry is taking too big a chunk of the clients’ return. While there certainly are lots of opportunities for low-cost investing (discount brokerage, ETFs, low-cost mutual funds), there are also pockets of the industry where fees are particularly egregious. For instance, the balanced fund category is generally too expensive for what you get (i.e. funds with a significant weighting in bonds charging equity-like fees). Structured products, which provide no transparency on fees, are even worse.

In two of the cases I referred to above, the clients were in premium wrap products, which means their money was being allocated across a wide range of managers. The wraps covered almost every asset class imaginable and included some unique and specialized managers. What caught our attention, however, was how little recognition there was of the investors’ dollar commitment. It makes economic sense, unfortunately, that a small investor should pay 2-2.5% for advice and other services, but for a larger client, it makes no sense at all.

From what we’ve seen over the last 5 years, each firm seems to have a different approach with regard to tapering fees. It’s all over the map. I would encourage readers who have larger portfolios to make sure they’re benefiting from their portfolio size. They’re in the drivers’ seat. Everyone wants their business and the fees should reflect that competitive landscape.