IFIC is calling on regulators to restrict the sale of mutual funds carrying embedded advisor fees — series A funds — to channels where advice is permitted, and not through discount brokers, for example.
“Investors who buy funds directly […] should be confident they are not inadvertently overpaying by selecting a series that includes fees for services that are not available through that platform,” says Paul C. Bourque, IFIC’s president and CEO, in a release.
Most companies provide other fund series with no or nominal trailer fees that investors can purchase if they are DIYers or want to pay for advice separately. IFIC’s proposal advances the goal of ensuring that low-trailer or no-trailer funds are available to these investors in a more uniform and transparent way.
“IFIC members believe that consumers should be able to choose for themselves the products, services and payment methods that best meet their needs and preferences,” Bourque says. “Today’s proposal would help to achieve a goal that the industry shares with our regulators: to ensure that fees are aligned with the services that investors receive.”
In an email to Advisor.ca, Ken Kivenko of Kenmar Associates expresses support for the proposal. “Good for IFIC in joining the voices calling for enforcement action,” he says, adding that Kenmar Associates has long been one of those voices. “Taking that 1% trailer commission is not acting fairly, honestly and in good faith with clients by discount brokers. Many seniors and retirees have been adversely impacted by inaction.”
The proposal follows IFIC’s recent call to regulators to extend client disclosure requirements to encompass the full MER of investment funds, an initiative referred to as CRM3.
Read: IFIC sets CRM3 in motion