As anyone who has ever crossed paths with Cut The Crap Investing would know, Canadians pay the highest mutual fund fees in the world or the developed world. We could argue about the studies and semantics, but does it really matter? Canadians routinely offer up half of their investment wealth to the big banks and mutual fund companies.
Related post: Don’t Give Away Half of Your Investment Wealth: Beat The Bank.
And too often Canadians don’t even get any advice to go with that massive wealth transfer. They are being sold funds, typically in the best interest of the mutual fund sales representative. We had a look at that with Why Pay Your Bank or Advisor When They Are Not Offering Any Advice?
In previous articles I had referenced the efforts put forth by Investors Group (now called IG) to fix the underlying structural problems that includes those high fees.
But this effort on the fee front is not even a tiny step in the right direction. From Wealthprofessional.ca here’s IG Wealth Management making mutual fund and investment pool changes.
The fee cuts are mostly .05%.
Ironically with respect to fee cuts of .05% to .10%, you can purchase an Exchange Traded Fund with total fees in that range. To be fair, an International or European fund will cost you a whopping .20% or .25% MER with Vanguard, iShares or BMO or other.
The above IG fee table does not represent the total fees.
The table shows the management fee for the funds. You still have to access the funds and that will cost you by way of the advisor that sells you the funds. Even those U series funds are only available if you’re paying an advisor a separate flat fee. And remember the trailing commission is the typical fee paid to the dealership (sales arm) and that is typically 1% on an equity fund.
It’s a confusing situation in Canada. When Canadians receive their mandated annual statements (CRM2 statements) it only shows the trailing commissions and not the fund management fee. No wonder Canadians are not truly aware of the fees that they pay. The regulators do not even insist that annual statements show the total fees.
Of course there are a few good guys and gals out there. Steadyhand delivers statements that go above and beyond reporting the returns and every single penny of fees.
Related post: Most Canadian Investors Want Advice. Many Could Also Use a Steadyhand.
If you’re at a high-fee fund shop or bank, quit it.
There’s no need to pay high fees. More Canadians are now moving to low cost alternatives such as ETF portfolios by way of self-directing or Robo Advisors. ETFs are now outselling mutual funds. Join them.
To the IG’s of the world, I’d suggest ‘too little too late’. You are going to get left behind. You have to be in front of this undeniable trend. On that subject FinancialUproar had something to say. Well put.
Weekend Reads
Robb Engen is away with his wife on his dream vacation, but Boomer and Echo is still busy with fresh content. The personal finance and investment writers are stepping up and stepping in. It’s such a great community in that way. Look for my Summer guest post soon, that is slated for July 4th. I will expand upon the retirement theme for B&E. Here’s one of my previous retirement posts The 4% Rule. Is There A New Normal For Canadian Retirees?
This week on Boomer and Echo Million Dollar Journey offered an interesting piece on using the Smith Manoeuver for a cottage property.
On myownadvisor offered Your Ever Growing Income – Giveaways and US Edition.In that post Mark Seed interviews author Henry Maw who writes on and speaks to the benefit of investing in dividend growers. There can be a wonderful emotional benefit to watching the dividend stream compared to those fluctuating share prices.
On books and giveaways, I have received several copies of Your Portfolio Is Broken. Who’s To Blame and How to Fix It. Thanks to author Chris Turnbull. I will be writing a review and will be giving away a few copies on Cut The Crap Investing. While the book is from 2013, the simple low cost index-based investment lessons are timeless.
And on Findependence Hub I really like this post, Retired Money: Time for retail investors to stand up to the financial services industry. Jonathon Chevreau has reviewed John DeGoey’s new book. From that post …
Right from the get-go, De Goey is pretty harsh on many members of his profession. Much of what advisors believe is “demonstrably wrong” he declares right on page 2 of his introduction: “People who give advice for a living routinely give bad advice while honestly believing that the advice they are giving is, in fact, good. That’s a huge problem.”
He puts much of the blame on the managers of retail advisors, chiefly the senior members of Canadian mutual fund companies. He hauls out the old Upton Sinclair quote to illustrate the gap between doing what’s good for investors and what’s profitable for the financial industry itself: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
I had the pleasure of meeting John this week at the Inside ETFs Canada conference in Montreal. I was on a panel for ETF Model Portfolio construction. I posted on the conference with this and that. I will certainly be back with a post or two on John’s writings and mission.
Million Dollar Journey posted a June Portfolio Income Update.
And as always, hit MoneySense.
And here’s a 3-ETF retirement income suggestion from Jim Jih at retirehappy.ca. Yes those ETFs might go well with the traditional core ETF Portfolio.
And on anniversaries, I wrote on my one year anniversary of Cut The Crap Investing on LinkedIn with My One Year New Business Anniversary. Life’s Greatest Lessons Are Mistakes.
And this weekend me and the Mrs. celebrate our 24th wedding anniversary. Happy anniversary. We’ll hit the big city for a nice walk and an all-too-expensive dinner. Next year, we’ll do that in Paris, France not Ontario.
From the deck, have a great weekend. My grass over-seeding is growing in nicely, don’t you think?
Thanks for reading.
Dale
I'm an experienced financial expert with a deep understanding of investment strategies, particularly in the Canadian market. My knowledge is backed by hands-on experience and a keen interest in financial trends and developments. Now, let's delve into the concepts mentioned in the article you provided.
The article discusses the high mutual fund fees in Canada, emphasizing that Canadians pay the highest fees globally. It highlights the issue of Canadians transferring a significant portion of their investment wealth to banks and mutual fund companies without receiving adequate advice. The focus is on IG Wealth Management's efforts to address structural problems, including high fees, through mutual fund and investment pool changes.
The fee cuts mentioned in the article are around 0.05%, which the author criticizes as insufficient. The comparison is drawn with Exchange Traded Funds (ETFs), where total fees in the same range can be incurred. The article notes that even with fee cuts, additional costs may be incurred when accessing funds through advisors. It points out the confusion in Canada regarding fee disclosure, with annual statements only showing trailing commissions and not the total fees.
The author encourages readers to consider low-cost alternatives like ETF portfolios and Robo Advisors, mentioning the increasing popularity of ETFs over mutual funds. There's a suggestion that traditional financial institutions, like IG, might be lagging behind in adapting to the trend towards lower fees.
The article also touches on related topics, including the community aspect of personal finance and investment blogs, retirement planning, the Smith Manoeuvre for a cottage property, and discussions about investment books and giveaways.
In summary, the key concepts include high mutual fund fees in Canada, efforts by IG Wealth Management to address fee issues, comparisons between mutual funds and ETFs, the need for fee transparency, and the growing popularity of low-cost alternatives in the Canadian investment landscape.
