To The Globe and Mail on disclosure of mutual fund fees
August 5, 2014
Re: “Mutual fund sellers find ‘a way to make people pay more’” (July 31, 2014)
Christopher Davis’s mischaracterization of mutual fund fees as ‘skimming’ is both bewildering and disturbing. Bewildering because, as a fund industry analyst, Davis is fully aware that trailer fees are completely authorized, highly regulated, and disclosed. Disturbing because, investors look to analysts like Morningstar’s Davis for accurate information.
As Davis well knows, the application of trailers is fully disclosed in each fund’s detailed prospectus and in its Fund Facts document. Soon, account statements will take commission disclosure one step further, to tell each individual investors exactly how much was paid in trailing commissions, in dollars and cents on each of their funds.
Trailing commissions are paid by fund managers to dealers (not advisors as the article states) to cover a range of costs, including managing the account and complying with regulations. On average fifty to seventy percent of the trailing commission is passed on by the dealer to the individual advisor.
For the average investor – trailing commissions represent an affordable way to pay for the services of an advisor – services that independent research shows deliver higher levels of wealth creation over time for investors.
Jon Cockerline, PhD
The Investment Funds Institute of Canada
Submitted: August 5, 2014