The Investment Funds Industry of Canada (IFIC) is asking regulators to create rules that would ensure mutual funds with an embedded advisor fee would only be sold in channels providing advice.
“Investors who buy funds directly, for example though a discount broker, should be confident that they are not inadvertently overpaying by selecting a series that includes fees for services that are not available through that platform,” says Paul C. Bourque, IFIC’s president and CEO.
Series A mutual funds include an embedded fee that compensates the financial advisor for providing advice to the client. Most mutual fund companies also provide other series of funds that have no or nominal trailer fees for do-it-yourself investors, or for those who wish to pay for advice separately. IFIC says that its proposal to restrict Advisor Series funds to those channels that provide advice would increase transparency and promote choice for investors.
Real and meaningful investment choice
“IFIC members believe that consumers should be able to choose for themselves the products, services and payment methods that best meet their needs and preferences,” said Bourque. He added that the “proposal would help to achieve a goal that the industry shares with our regulators: to ensure that fees are aligned with the services that investors receive. It reflects the industry’s commitment to provide Canadian consumers with real and meaningful investment choices.”
This proposal follows IFIC’s recent call to regulators to extend client disclosure requirements to encompass the full Management Expense Ratio (MER) of investment funds, sometimes referred to as CRM3.
Regulators are currently consulting on the issue of whether or not to ban embedded commissions.