Mackenzie Investments, Invesco and BlackRock are each launching funds for DIY investors.
These Series D funds, which will be offered through RBC Direct Investing, will strip out the advice portion of the trailer fees, bringing the dealer remittance to 25 basis points for Mackenzie and Invesco funds. (Details from BlackRock are pending.) The initial investment minimum will be as low as $500.
“We’re not doing this as a growth initiative,” says Mackenzie president and CEO Jeff Carney. “We’re not moving resources over to support [the DIY] channel; we’re addressing the assets that are already there.” He notes that fewer than 5% of mutual fund assets are in DIY platforms, and of Mackenzie’s funds, “less than half that” are in DIY.
“Investors are better off with advisors than without,” Carney adds. “That said, there are people who would like to do it themselves. That’s an important part of the mix of the marketplace.” And those people “are overpaying for a service they don’t get.” Mackenzie’s position on embedded fees is that it’s a “proponent of choice for investors.”
Invesco president Peter Intraligi stresses his firm is “not walking away from the advice channel.” He says the impetus for launching Series D funds was the December 2012 CSA Mutual Fund Fee consultation paper.
“We were concerned that if we didn’t address the shortcomings of the industry, the outcome could be extreme measures like banning trailer fees, and that would do more damage than good,” says Intraligi. An Invesco study states that 78% of investors prefer to pay for advice through their mutual funds, and 79% would not support a ban on embedded fees.
He adds, “If we’re going to stand up for choice and transparency in the market, it would be quite hypocritical to defend [those things] if you’re not going to do it on behalf of all investors.”
Intraligi reiterated this position at the OSC Mutual Fund Fees Roundtable in June, where he said his firm would consider offering Series D funds. “But we have no control over whether these series are made available on DIY platforms,” he said at the time. During the same roundtable, a commissioner asked Doug Coulter, who represented RBC Direct Investing, “If someone wanted to come onto your platform that’s a third-party fund and offer a Series D platform, you would allow them on your platform?” Coulter replied yes.
As for logistics, Mackenzie and Invesco will continue to offer Series A through both RBC and other discount brokerages. Mary Taylor, Mackenzie’s EVP of Product and Marketing, says the onus will be on investors to make the switch to Series D. “But over time we expect [Series A adoption] will gradually fall off,” she says.
“Bringing Series D mutual funds from additional fund companies to our product shelf ensures that self-directed investors will be receiving added choice coupled with value for money,” says Rosalyn Kent, president and CEO of RBC Direct Investing, in a release. “We hope that more mutual fund companies offer Series D versions of their funds, to bring even greater choice and value.”
All Mackenzie’s existing funds will have Series D versions, except its corporate class version of Symmetry Portfolios and its money market funds.. Most Invesco funds will also be offered as Series D.
RBC does not have exclusive rights to the funds.
Last month, RBC Global Asset Management was lowering the initial minimum investment purchase amount for its Series D mutual funds to $500 from $10,000.