Once commissions are extinct, the era of building decent income from funds with exit fees will be over. Newcomers will have to work in tandem with seasoned advisors to survive. 

Acquiring assets under management of $10 million in the first year is already a feat for a young mutual fund representative. It may well become the minimum required to survive on one’s own, says Jason MacKay, senior vice president, national sales manager of Invesco Canada.

If a mutual fund firm collects fees of 1% on each account, a young advisor can earn $100,000. The firm keeps half, leaving the advisor with $50,000. 

Alternatively, a recruit can team up with a senior advisor armed with a vast clientele and ideally a dual license, who has already segmented his clientele or plans to do so. The recruit can then prospect the mentor’s bronze clients, hoping to increase their savings or discover a need for other product categories. 

A ban on commissions would force advisors to change their compensation model, McKay adds. “If you’re just investment-based, you’ll have a hard time building up revenue if you’re not a financial planner in a bank, with salary and bonuses. You’re going to see a lot of advisors shifting back to insurance,” he says.

He thinks a higher level of commissions on sales of life insurance products would let advisors build better income.

However, the future is uncertain for segregated funds, which will eventually be treated like mutual funds by regulators, McKay believes. “That’s what I say to advisors that want to switch from mutual funds to seg funds, and that think that the segs are immune.”