To The Globe and Mail on competitive fee models
November 22, 2013
Re: “Don’t let high management fees drain your portfolio” (November 22, 2013)
The article High management costs drain portfolio growth (Nov. 22, 2013) falsely implies that a number of rankings show Canada among the worst in fees for financial products. In fact, there is only one source for this assertion—a flawed analysis, based on incomplete data published by Morningstar U.S. that failed to take into account the full costs of mutual funds for U.S. investors. In the U.S., the majority of investors pay an additional fee over and above the U.S. version of the MER for their advisors’ services, whereas in Canada, all costs are included in the MER.
Similarly, financial advisor Paul Rosentreter’s claim that he can reduce investors’ fees to 1% is misleading. While he may recommend products that do not include an embedded fee for advice, he omitted to mention that he would charge a fee directly to the client, one that may or may not exceed the fees paid under an embedded structure. Such self-serving claims simply serve to confuse investors and unnecessarily dampen investor confidence. The bottom line is: both payment models are available at competitive prices in the Canadian mutual fund market, and advice—whether paid for directly or through embedded fees—significantly benefits the majority of investors that use it.
Jon Cockerline, PhD
Director, Policy and Research
The Investment Funds Institute of Canada
Submitted: November 22, 2013