To Zoomer Magazine - Canadian investment fees not out of line with other countries
February 15, 2017
RE: Why Are Investment Costs In Canada Higher Than Most Other Countries? (Peter Muggeridge, February 13, 2017)
The correct answer to this question is that Canadian investment fees are not out of line with other countries. Muggeridge omitted an important caveat in Morningstar’s 2015 report: a key attribute of Canadian fund fees that skews their placement downward in a raw global comparison is that they usually include fees paid to the advisor. In the U.S. and several other countries, most investors pay a separate fee in addition to the MER for advisor services. To properly compare expense ratios with Canada, the advisor fee should be added to expense ratios in other countries. Morningstar acknowledges its report’s deficiency in this regard, stating that an accurate comparison would place Canada at: “the top half of lower fee markets” in the 25 countries that Morningstar studied.
Comprehensive research conducted in 2012 and 2015 by independent research firms in the U.S. and Canada showed conclusively that costs to advised investors on both sides of the border are almost identical: 2.02% (before taxes) in Canada and 2.0% in the U.S.
The investment funds industry fully shares the regulators’ goal strengthen investors’ understanding of their investments, including the fees they pay and the services they receive. The new information will help investors make more informed decisions. This will be a positive outcome for everyone.
Paul C. Bourque, Q.C.
President and CEO
The Investment Funds Institute of Canada
Published February 15, 2017