The experts react

Nicholas Miazek
vice president, Fiera Capital Corp., Calgary

Different compensation platforms will continue to exist. Some clients don’t like seeing the fee. And for them, management expense ratios will still make sense.

I don’t think somebody with a $25,000 or $50,000 portfolio has the ability to pay for financial planning and investment management on an hourly rate. Those costs will quickly exceed the ability of their portfolios to generate returns to offset it.

Rebecca Cowdery
partner, Borden Ladner Gervais, Toronto

In 2014, it’s unlikely we’ll see anything more than a summary of the comment letters, and perhaps some additional requests for feedback. I believe they’re genuinely considering multiple options, and
that a formal ban on trailing commissions isn’t a fore-gone conclusion.

Carol Lynde
president & COO, Bridgehouse Asset Managers, Toronto

We support embedded fees as one way for investors to pay for advice. More than 50% of investors prefer to pay in this manner. The fund industry has grown to $1 trillion under this model, so we need to build on it, not dismantle it. The value of advice can still be articulated, even if the fees are embedded. It’s important that investors understand how they are paying, the amount and the value. With CRM II, that information will be disclosed. And we need to achieve comprehension. Advisors help do that.

Jolene Laing
branch manager, ScotiaMcLeod, White Rock, B.C.

Fee transparency is not going to be a choice in the near term. So it’s absolutely necessary that more compensation go toward fee-for-service. The reason I was an early adopter is because I want my clients to know what they’re paying me, to understand why they’re paying me and to see the value I add. The only way I can get a pay raise is to grow their assets.

Michelle Alexander
director of policy, Investment Industry Association of Canada, Toronto

We should wait for the new rules to be fully implemented and evaluate them after about a year, instead of introducing a wholesale revision to a system that isn’t fully in place. The discussion paper almost makes it seem as though CSA is implying CRM II and Point of Sale will fall short of their intended objectives.

Greg Pollock
president and CEO, Advocis, Toronto

Banning embedded compensation will lead to less availability of advice, putting Canadians at risk of not meeting their financial goals. There should be a range of choices for people in different financial circumstances at different points in their lives. For wealthy investors, it’s probably more appropriate to have a fee-based advisor, or one who charges a percentage of assets under management. But for Main Street Canadians, the embedded compensation model works.

Martha Kane
industry consultant, Vancouver

If the regulators have faith that CRM II is going to work, then why do they need to strip out embedded fees and make them another line item? What additional benefits are they hoping for?

And why is the focus just on embedded commissions? Why aren’t they also stripping out embedded management fees?

Also, with the movement toward fee-based accounts, is it just a matter of increasing transparency? Now that dealers are in control of what’s being charged, […] it may be that investors end up paying more. Often, advisors are seeing it as [an opportunity] to offer more services at higher prices, and I’m not sure if those additional services are consistently being delivered.

Craig Senyk
director of portfolio management, Mawer Investment Management, Calgary

I’m hopeful the industry will change, but I’m [not terribly] optimistic. Just look at the significant opposition to the CSA proposals. There seems to be fear that if there is more transparency to the system, clients will desert the industry.

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