Embedded mutual fund trailer commissions are one of the worst inventions ever created for the “benefit” of Canadian investors and anyone who claims differently has no knowledge of investor protection and wilfully ignores the abuses conflicted advice inflict on trusting investors. Trailer commissions create the perfect misalignment of advisor incentives with investors’ best interests. There is no relationship between the payment and the advice received and conflicted financial incentives drive behaviour which is not always in the best interests of the investor. Trailer paid by investors exceed $4.6 billion each year excluding the millions of dollars paid in up-front commissions on deferred sales charge (DSC) funds comprising nearly one fifth of load mutual fund assets. Compensation for these services by a third-party product provider does not encourage an efficient market. Accordingly, Investor advocates are pressing for the prohibition of these commissions designed by the marketing departments of mutual fund companies. There is in effect an attempt by some dealers to masquerade a product-based proposition as a valuable service-based proposition. There is thus a misalignment between the services provided and the trailing commission paid. Because of the lack of clarity of the “advice” content of trailers, clients have no reliable signpost to help them assess the cost-benefit of the “advice”. What they can discover is the fact that the vast majority of actively-managed mutual funds fail to meet a passive benchmark over the longer-term -the main reason? – Fees. Read More: Trailer Commissions Kivenko | Portfolio Audit portfolioaudit.ca/trailer-fees-kevenko/
Posted on: Wed, 12 Jun 2013 17:40:33 +0000
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