The Ontario Securities Commission’s investor advisory panel is continuing to lobby for eliminating embedded mutual fund fees, and it says evidence in the U.K. shows the new fee model is working.
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Canadian advisors need to follow the lead of their peers in the U.K. and Australia and eliminate what the panel calls “conflicted compensation models.”
The panel also scuppers the argument that eliminating embedded compensation won’t cause a shortage of affordable advice.
“Investors are already indirectly paying roughly 1% of the MER for advisor advice,” the panel writes in its annual report. “With embedded commissions prohibited and this portion of the MER no longer paid directly by the fund manufacturer to the dealer/firm, this money would now be available to the investor to negotiate and freely purchase advice services that the investor wants and needs.”
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It goes on to say that simply disclosing the fees to consumers isn’t enough to protect them, and the regulators should move on changes now.
“The slow pace of reform in Canada is unacceptable. It is time to emulate regulators in the U.K. and Australia and ensure that Canadian investors enjoy the same level of investor protection,” they write.
The panel is more cautious about a best interest duty for advisors and dealers. Though it’s “fully supportive of a higher standard of investor protection,” any move to such a standard may need to be supported by higher proficiency standards and reforming advisors’ titles to more accurately reflect their training and what services they provide.