Regulations and a trend away from commissions have prompted Horizons ETFs Management to shut down its advisor-class exchange traded funds (ETFs).
The fund company announced last week that it has decided to eliminate all advisor-class units of its Canadian-listed ETFs. The units will be closed to purchase as of January 31, 2017, and the class will be completely eliminated by the end of April, 2017.
Horizons ETFs says the current regulatory environment has put a greater focus on investment fee transparency and encouraged more advisors to make the switch to fee-based advice, making its advisor-class units less appealing.
"Less need for investment funds"
"We launched advisor-class units in Canada within our suite of actively managed ETFs as a bridge to allow commission-based investment professionals to embrace ETFs and transition away from mutual funds with service fees," says Steven J. Hawkins, President and Co-CEO of Horizons ETFs. "Increasingly, we've found that commission-based investment advisors who have become ETF investors have tended to transition to fee-based accounts as well, and we expect this will be a long-term trend in the Canadian investment industry. As a result, we think there will be less need in the future for investment funds, particularly ETFs, to offer embedded compensation to investment professionals."
Advisor-class units will be converted
Horizons says that advisor-class units will be converted into the common-class units of the same ETF on a NAV-over-NAV basis so that there will be no taxable implications for clients and no impact on their investment performance. "The only difference is that no service fee will be paid on the new converted units, so the cost of ownership will actually be lower for end unitholders," explains Hawkins.