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The CSA has published the Mutual Fund Fee Research report prepared by The Brondesbury Group.

Read: Use CRM2 to prove your value

Key findings include:

  • Evidence on the impact of compensation is conclusive enough to justify the development of new compensation policies.
  • There is conclusive evidence that commission-based compensation creates problems that must be addressed. Fee-based compensation is likely a better alternative, but there is not enough evidence to state with certainty that it will lead to better long-term outcomes for investors.
  • Compensation influences the flow of money into mutual funds. Higher embedded commissions stimulate sales.

Read: So you’re fee-based. Now what?

  • Advisor recommendations are sometimes biased in favour of alternatives that generate more commission for the advisor.
  • In the absence of embedded compensation, advisors recommend lower-cost products. These typically have better returns because of lower expenses.
  • Funds that pay commission underperform. Returns are lower than funds that don’t pay commission whether looking at raw, risk-adjusted or after-fee returns.

Read: CRM2 could cause irrational client behaviour

Originally published on Advisor.ca

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