- Comments (16)
- Text Size: Down Up
moneysense.ca, 21/08/06
Mutual Fund Fees
Jonathan Chevreau, personal finance columnist for The National Post, has highlighted a study that points out that mutual fund fees in Canada are the highest in the world. It is widely known that mutual funds domiciled in the United States are cheaper, but the fund industry has argued that there are economies of scale in operating in the United States. But the new study points out that the fees charged by the median fund in Canada is the highest among 18 countries covered by the study in every fund category.
The fund industry would no doubt spin the report, trotting out lame excuses as to why it is expensive to operate in Canada. But, the bottom line is that it will be tough for Canadian mutual fund investors to accumulate a decent nest egg for retirement while paying 2.36% for the median bond fund and 2.81% for the median stock fund in fees every year.
The Canadian mutual fund industry will not change its merry ways if investors are apathetic about the fees that come out of their pockets. As Mr. Chevreau writes in a blog post: “the only way fees would come down in Canada would be if consumers voted with their wallets for lower-cost funds.”
moneysense.ca, 21/08/06
Sigh.. I’ve had to put Canadian brokerage comission fees, high tax brackets… and most recently credit card interest rates on notice.
I forgot about high mutual fund fees. Thanks for reminding me. They’re also not on notice!
sigh.. I meant “now” instead of “not”
People are their own worst enemies. Great inexpensive funds from P,H & N, Mawer, Saxon,RBC O’Shaugnessey etc are available as well as TD e- fund index funds and iShares. If consumers moved on mass to these lower priced products, companies would have to lower rates to compete. It kills me that people will drive around town or go across the border to save a few bucks on some consumer purchases but won’t take the time to research how their money is invested or what companies/products offer the best value when it comes to their investments!
I think those who care already vote with their dollars by putting money to lower MER fund (such as index funds and ETFs). Like they says: God willing to help to these who helping themself.
Another point: not every mutual fund with high MER is bad, we should see what is a return after all fee deduction (the only problem it’s hard for regular people like me to get through all of this financial mumbo-jumbo they put in prospectus).
This guys (http://www.asldirect.com/) help you to get back trailer fee (that usually going to the broker that sold you fund as long as you stay invested in the fund – one of the reason why brokers discourage people to switch to other fund with may be lower trailer fee).
It’s good book called “Naked Investor” by John Reynolds (http://www.chapters.indigo.ca/books/item/books-978014301623/0143016237/Naked+Investor?ref=Search+Books%3a+'Naked+Investor‘) where he is talking about different side of investment industry in Canada (high MER, fraud, etc). Worth to read.
Last word: I believe that main responsibility of each and every one who wants to invest it to take time for educating themself. Knowledge is power and more you know, less chances you’ll fall for some bad ideas coming from financial adviser (such as labour-sponsored funds which heavily pushed every January and February by too many so called “financial advisers”).
I have been a subscriber to moneysense magazine for years in an attempt to increase my investment knowledge…I am admittedly very green in this area, but I am trying.
For years I have been reading about their ‘couch potato’ strategy and seen how it has experienced tremendous returns YOY. This strategy has always interested me as I am not the kind of person who wants to be checking up on my investments on a daily basis. I want to put my money somewhere I am comfortable with, forget about it for a year and then adjust every year…low maintenance being the theme.
So recently I have done just this and moved all of my funds out of RBC and CI where I was paying anywhere from 1.8-2.8 in fees. I opened up a TD Waterhouse trading account and purchased various E-funds that charge around 0.3-0.4% in fees and there is no charge for purchasing. The way I see it, even if these funds perform on average 2% worse than my old funds I am still doing just as well. I guess I will see over the next few years. Either way I cannot see how I can do worse as my old funds never did supply me with very good returns.
Just thought I would share my experience.
Mutual funds are a bonanza for the financial “industry”. They wear suits, drive Jaguars and have carpeted offices – all from the fees. That’s why you see full page ads for funds. Wouldn’t you rather have that money invested and working for you? 2% or 3% doesn’t sound like much but when you look at how that cuts into your lomg term compounding, it is truly shocking. Some people have paid or forfeited half of their long term gains because of mutual fund fees. And the kicker???? More than 50% of funds don’t even keep up with the market!
[...] Way to Go Mutual Fund Companies in Canada By The Dividend Guy Canadian Capitalist [...]
Between the high Mutual Fund MER’s, the high banking fees, the high insurance premiums, the high credit card rates … you can either pull your hair out or look at it as an opportunity. The ologopolistic financial market in Canada with the very high barriers to entry and the demographic trends in my opinion make the following Index Fund very attractive over the long term:
http://ca.finance.yahoo.com/q?s=XFN.TO&d=t
I have held it for over four years now and smile every time some Canadian bank or insurance company announces record profits (again and again).
Is there a list of Funds showing MER’s so a person can compare?
[...] Rob Carrick’s column in The Globe and Mail. James Daw’s column in The Toronto Star. The original study. The industry’s lame [...]
Companies with charge whatever the public is willing to pay. When they start losing business, they will have to make whatever adjustments they need to make.
It is unfair trade to by canadian mutrual fund as an individual.
bank or nutrual fund management take 2-3% or higher to a comsumer, on the table;
there are also many hiden rule of mutual time unloading, market call charge, etc, many , many of extral charge on top of the 2-3% charge;
there is no much choice for working class canadians, because rich one has insider benifit and goes to US to invest too. rich one contrals canadian finance and policy.
the best way for working class is to invest by themselves, into other country, into business or real estate. It is hard, but rich one don’t give a dim to working canadian.
it is a dark picture of this place, many bright side thou.
hi,
Does anyone know what a ”IDSC” and how it differs from DSC.
Thank you
Many people cant manage their own investments therefore turning to an advisor seems like the simple solution. The problem is you can also hit and miss with an adviser as well, and miss more likely over time. I believe there are good advisors out there however I have not met any in my 21 years of investing. Unfortunately it took me a long time to realize this and I am now 100% on my own. The greatest feeling about investing yourself is knowing where you money is and having the freedom to change positions quickly if need be. It also forces you to educate yourself about the financial world and how to protect your savings. And yes you save a bunch on fees, trades are 10$ and funds have 0.1% to 1% mer’s depending on the type of ETF/ Mutual Fund. “Its amazingly sad what certain people will do for money” Keep this in mind when you’re trusting your hard earned savings to someone els that you may know well or not at all. Good luck
As a licensed Portfolio Manager and insider of the industry, I was very pleased to read that the Canadian government is finally starting to tackle the unethical practice of hidden mutual fund fees.
It is quite incredible to think that the government allows this practice whereas other western countries like the UK, Australia and the US require the disclosure of all fee costs to the clients. In Canada, hard working, honest, unsuspecting investors put their faith with their mutual fund advisor not understanding the out-of-pocket costs at all.
Recently, I performed an audit for friends of mine. Both are smart, successful entrepreneurs. One is even a financial savvy accountant. They had absolutely no idea that they were paying $31,000 in fees a year on their million dollar portfolio. Moreover, their bank advisor had sold them the funds with a deferred sales charge which is another black mark / scam in my opinion.
Unfortunately, most people are unaware that mutual fund salespeople do not owe a fiduciary duty to their clients. This means these salespeople are not legally required to act in the best interest of the client. Aye, there’s the rub — there is a huge conflict of interest as advisors make the most money for themselves by placing clients in high expense mutual funds that pay the most in hidden trailer fees.
For now, we can only hope this issue gains more traction. Having high mutual funds fees provides absolutely no social benefit to our community. It simply is a way of siphoning money out of the hands of good, honest Canadians.
Jeff Kaminker
President, Fronwater Capital
http://www.fwcapital.ca