The mutual fund industry is constantly evolving. These days, it feels as if the potential changes coming down the pike are the biggest ones in decades. The truth is, some of them are.

But let’s not get ahead of ourselves. Much of the media attention is focused on conversations that at this point are simply that: conversations.

Take mutual fund fees: the discussion about whether Canadians would be better served if the costs of owning mutual funds were “unbundled” has a long way to go before something—if anything—becomes concrete. So too does the conversation about whether Canadians would be better served if their financial advisors were bound by a “best interest” duty.

Some changes are already upon us, however.

Consider that we’re a month into the three-year transition period for the rules tied to the Client Relationship Model – known as CRM 2—which came into force July 15. In addition, there is a new point-of-sale disclosure requirement where the simplified prospectus will be replaced by a “Fund Facts Sheet.” This disclosure requirement comes into force June 13 next year.

Top it off with the shifting economics around retirement – longer lifespans, reduced support from the government, generally low investment yields, pension fund challenges – and it looks like we’ve got our work cut out for us.

I believe there’s never been a more exhilarating time to be in this business. Because amid all these game-changing factors, one thing is constant: we’re all fighting for what we believe is the ideal path forward for Canadian investors.

In some cases, moving forward may appear on the surface to require a step back. It may mean rethinking a model that worked well enough–until the day it didn’t.

Those following recent industry changes are aware that the government is prohibiting investment companies from using forward contracts in their funds to gain preferential tax treatment through income conversion. The change will likely have a significant impact on corporate class funds in particular as companies work to modify these structures.

For advisors who feel they’re ready to take their conversations with investors to the next level, I’d like to offer some food for thought:

  • Starting the conversation early is paramount. It’s important to understand what the fund manufacturers are planning with respect to funds that have been using forward contracts for income conversion. You’ll want to be prepared to explain the possible implications to investors when those forward contracts expire.
  • Product allocation may be more critical. The effect will be more pronounced on corporate class structures that are heavily weighted in fixed income and foreign equity than on Canadian equity. Since the funds will no longer be able to convert their income, a portion of the corporate class tax advantage will be lost. Corporate class structures that are heavily weighted in Canadian equity are more likely to retain the remaining tax advantages of the corporate class structure, such as tax deferred switching between classes.
  • Keep things in perspective. Remember – the planned prohibition against income conversion using forward contracts applies only to this particular aspect of corporate class investments. The original and primary features of the corporate class structure – namely the ability to switch among different classes within the corporation without triggering a taxable event and the corporation’s ability to offset income with expenses – remain in place.

Finally, when examining – or perhaps even re-examining – the suitability of corporate class solutions for investors, consider a back-to-basics approach.

It’s industry evolution such as this that underscores the true value of advice.

Sun Life Global Investments launched its corporate class platform earlier this month. And even though the finance department’s March announcement about the conversion prohibition threw a wrench into our plans, we adapted. We used the opportunity to create a suite of funds built especially for today’s investor. (I should note here that the Sun Life Global Investments Corporate Class mutual funds each represent a separate class of shares of Sun Life Global Investments Corporate Class Inc., a mutual fund corporation.)

This opportunity to adapt, to evolve, for all of us to take our businesses to a higher level with the aim of helping investors reach their financial goals – there’s never been a better time.

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Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.


Rick Headrick is President of Sun Life Global Investments (Canada) Inc. In this role, Mr. Headrick has overall responsibility for the development, management and growth of the investment company. Mr. Headrick works with investment colleagues across Canada, the United States and Asia to encourage investment product development and facilitate the sharing of knowledge across Sun Life Financial’s investment management community.

Mr. Headrick joined Sun Life in 2004 and has held several senior leadership roles across the company’s wealth platform. He holds a Bachelor of Commerce and LL.B. from the University of Saskatchewan and was called to the Ontario Bar in 1994. He also holds a Certified Financial Planner (CFP) designation.