Commission or fee? How about ad-driven?

By Vikram Barhat | October 13, 2010 | Last updated on October 13, 2010
4 min read

The ongoing fee-versus-commission debate is about to get yanked in a whole new direction: no fee, no commission. How’s that for unbiased financial advice that keeps client interest front and centre and costs at bay?

At least that’s the promise being dangled by, a website that makes the bold claim of being “Canada’s first online financial advisory service.”

“Although largely gone unnoticed, Canadians are paying thousands of dollars each year in unnecessary investing and banking fees which plans to expose and eliminate,” says Matthew McGrath, president and CEO of Optimize Inc. which owns

Relying on online advertising to generate revenue, the site disregards established compensation structures that interlock financial advice with custody of client assets. Its business model, it is claimed, ignores the trailer fees and other commissions that come with investment custody and instead provides individuals impartial free online financial advice without holding their accounts in-house.

The site aims to do to the financial advisory industry what online banks have done to the banking industry. “As online banks have passed on to their customers the cost savings and reliability of a branchless banking experience, so too will Optimize pass on these same benefits to its clients as it relates to providing online financial and investment advice,” says the site.

The local advisor community admits that interactive financial advice tools are growing; some go so far as to say, in the long run the concept could potentially change the way financial advice is delivered to investors. But can such self-help services replace the traditional in-person approach with a faster, cheaper, straight-into-your-living-room model? The industry’s response is a resounding no.

“Traditional in-person investment advisors will always exist for those who are unable or unwilling to manage their own financial situation,” says Aaron Fennell, senior market strategist of Lind-Waldock Canada, a brokerage firm with offices in Toronto and Montreal. “Further, the complexity and pace of change in the financial markets will continue to maintain a need for professional and sophisticated financial advisors.”

Marc Lamontagne, partner at Ryan Lamontagne Inc. couldn’t agree more. “I think we are years away before these online calculators can explain and recommend more sophisticated financial planning such as when to use a spousal trust or why leveraging may or may not be appropriate.”

Financial advisors, however, know they aren’t getting a smooth ride through the current economy. Poor market performance over the past decade has made the fees more visible. Tough times, say advisors, also underscore the need for increased investor awareness.

“In the future, successful investors will be those who take responsibility for their own financial situation and carefully educate themselves about economics and the financial markets,” says Fennell. “Investment advisors will need to use creative and non-traditional investment strategies to create return for their clients in such a difficult economy.”

Investors too, he adds, will need to take a proactive and multi-directional view of the various markets. Offering online tools is one way to help them do that. Clients who realize that are increasingly asking for more sophisticated and interactive online tools.

“This type of bells-and-whistles website will certainly attract the web savvy client,” says Lamontagne. He asserts, though, technology will complement rather than replace the traditional models by potentially enhancing the client relationship.

According to the results of the recent FPSC survey, Canadians are better off dealing with a professional financial planner, rather than going it alone. However, online financial planning is better than no planning, says Lamontagne. “There is a market niche of investors who want to be DIY and from what the discount brokers say, it is a fast-growing segment (post-2008 recession) of the market.”

As a self-service investment product, the site’s recommendations focus on finding individuals instant savings across their mutual funds and other banking products while improving their rates of return and overall financial health. It does so in its “Get Instant Savings” section, which recommends investment vehicles as a replacement for the user’s current holdings.

Making product recommendations digitally requires some regulatory approvals or it may run afoul of regulators. McGrath assures that’s been taken care of. “Optimize Inc. has indeed been approved and registered by Provincial Securities Regulators under National Instrument 31-103, Registration Requirements and Exemptions, as a portfolio manager.”

Consequently, under Canadian Securities Law, as a portfolio manager Optimize Inc. may act as an advisor in respect of any security, he adds.

The regulators, however, reserved their comments about the site’s model. “It’s not our policy to comment on registrant service models,” says Theresa Ebden, senior communications officer of Ontario Securities Commission, when asked to provide the regulator’s perspective.

“We wouldn’t have a view, as there are so many organizations that provide advice that we don’t regulate,” says Connie Craddock, vice-president of public affairs, IIROC, but she adds that “people should be very careful, use their due diligence, and be sure they’re getting advice from an independent and informed source.”

The website plans to add other services including free online portfolio analysis, financial planning and aggregated banking platform.


Vikram Barhat