By Tom Bradley

Last week, we filed a submission to the Canadian Securities Administrators (CSA) on their Discussion Paper on mutual fund fees. If you have an interest in this topic, we’d encourage you to give it a read. If you’re a Steadyhand client and don’t have the time or interest in this stuff, be assured that you’re on the right side of low and transparent fees. On your quarterly statement, you can see what you’ve paid ... to the penny (or should I say nickel).

In our submission, we advocate for dismantling the current system of embedded mutual fund fees whereby investment management, advice and sales commissions are all mixed together. There is overwhelming evidence (including recent research conducted by the CSA) that investors don’t understand how much they’re paying in fees or how they’re paying them. By separating the payment of these activities and reporting clearly on each, the system would be less opaque and give clients the opportunity to assess the value they’re receiving in each area. There will also be less opportunity for conflicts of interest between the client and advisor. As the CSA paper points out at great length, the current regime provides far too many opportunities for the system to work against the client.

Our submission is critical of the current regime, but we’re optimistic that new rules will breed some interesting new business models, both within the existing institutions and through the creation of new players. Over the last three decades, the wealth management industry has demonstrated a remarkable ability to innovate. As long as the current subterfuge goes on with mutual fund fees, however, firms have no motivation to change or improve the delivery mechanism for fund management and financial advice.

When the CSA levels the playing field between the client and advisor, the innovation machine will switch on and business models will be created to fit the new landscape. We have to get to a place where clients better understand what they’re paying and will be more empowered to generate better returns.

Related reading:
Mystified Over Fund Fees? Big Changes are Coming, and the Sooner the Better