OSC director John Mountain revealed to attendees of the Registrant Regulation conference yesterday that he’s a fan of fintech.
In a conference session on mutual fund fees, Mountain, who’s director of investment funds and structured products at the OSC, says he was motivated to invest with a robo-advisor because traditional firms don’t explicitly make clear what services they offer for fees charged. (His comments were made during discussion that trailing commissions paid by fund managers to dealers don’t necessarily reflect the advice and services received by investors.)
“I was not getting value for the money I was paying,” he says, adding that his experience provides anecdotal proof that “there is no transparency.”
Despite that statement, concern that robo-advisors are replacing real advisors is overwrought, as online platforms and advisors make nice and become business partners.
The success of that partnership was evident at the Registrant Regulation conference’s fintech panel yesterday. The panel featured compliance officers from robo-advisory firms, who foresee a bright future in business to business, as they offer their platforms to advisors.
For example, an advisor might provide financial planning to a client, but that client’s assets would be managed by a robo-advisor. For making the referral, the robo-advisor pays a fee to the advisor.
Alternatively, traditional firms can use robo-advisors as white labels, as Credential does with robo-advisor Nest Wealth. Debra Thuet, compliance manager at Nest Wealth, expects this practice to become increasingly common. In anticipation of growing business, she says, “Our team plans to double in the next couple months.”
Fintech offers transparency
Advisors working at the online platforms represented at the panel are paid salaries, panellists confirm.
Thuet says typical retail clients at Nest Wealth are in their mid-40s with $150,000 to invest. Accounts above $150,000 are charged $80 per month, plus MERs. But if a client has only a few thousand dollars, that investment would go into a single ETF, she says. (A spokesperson later clarified that the ETF would be managed at no charge. The fund would also reflect the individual’s risk profile.) Accounts of $75,000 or less are charged $20 per month.
Also read: Your services are too expensive: survey