When Ontario announced that it is harmonizing its sales taxes, the mutual fund industry went on a publicity drive shedding crocodile tears over how the HST is going to cost investors. I thought the chutzpah of an industry known for its sky-high fees complaining about investment expenses to be breathtaking (See post: Harmonization and mutual funds). Since then British Columbia has announced plans to harmonize its sales taxes as well and mutual funds are once again going in to bat for the plight of the retail investor. But the Ontario Government is not willing to tolerate criticism from the industry anymore. The Globe and Mail reported (See: Ontario fires back at mutual fund industry) that Government “has threatened Canada’s mutual fund industry with a PR offensive against management fees charged to investors, unless fund executives mute their objections to proposed sales tax changes.”

It is sad to see our elected representatives stoop to the level of blackmail — not out of any principle that a lot of products sold by the financial services industry impose a terrible cost on the savings of Canadians but simply to avoid the inconvenience of tough questions when Queens Park extracts its pound of flesh. Personally, I would like to see that PR offensive. An increased awareness that costs matter in investing can only help.

This article has 14 comments

  1. This makes me sad. So our Gov’t knows that some of the management fees charged by Funds Companies are unethical…but are letting them slide.

    This offends my sense of justice more than the blackmail thing.

    Cheers

  2. Great idea CC! I bet the fund industry has more money behind it with the motivation of continued fees vs. the government attempting to sell an already unpopular new tax that people already see as an extra revenue grab.

  3. One thief warning another to lay off its profits, lest their own scheme be revealed.

  4. CC i agree. Let the PR offensive begin on both ends. Many people dont understand just how much both sides take millions from peoples nesteggs.

  5. MF’s are a big scam, they benefit the banks and institutions providing them. The MER fees are outragous. I have MF’s that my current emploer provides in the form of an RRSP, but once I leave the company I will be moving that money out.

    To think that the government is going to step in and stop the corruption, is insane. This goes for everything that people complain about..ie cell phones.

  6. This gst/pst harmonization is a bad idea but I never heard of any publicity from the mutual fund industry saying that it would cost investors. Were there advertisements somewhere? I wish both sides would battle. I hate the tax and I hate the high mutual fund fees.

  7. This is probably subject of a longer post but the mutual fund industry conveniently ignores the fact it can claim input tax credits on both the GST and PST portion and will probably end up saving more taxes which they could pass on to the consumer (highly unlikely).

  8. I agree MER’s are too high but the real sad thing is that the government is willing to let it slide as long as the industry stays quiet on taxes.
    Instead the of government having reasonable debate on the tax issue we have a scheme to keep debate down. Sad.

  9. I would be surprised to see the PR campaign take flight. The financial industry has a lot of clout in Ontario, and this could in fact be the impetus for a change of government should this come to pass. I’m sure it’s a decision that won’t be taken lightly, that’s for sure.

    I’ve had more than one person immediately react to the news by indicating that there are a lot of conservatives in the fund industry.

    Interesting times…

  10. Canadian Capitalist

    Like boko, I’m not looking for the Government to step in and protect people from themselves. After all, we are capitalists, not communists and asset managers should have the right to hawk their high-priced products.

    Thicken, I’m not sure how much input tax credit will be available to asset managers. I’m guessing that unlike, say homebuilders, any input tax credit should be minimal. There may not be much savings to pass it on to fundholders.

    Preet: Nevertheless, it would be nice to see a brawl between the industry and the Government. Heck, I’d pay to watch it!

  11. CC: I believe you WOULD be paying to watch it… 🙂

  12. why do u say mer’s are too high? when u trade stocks do you pay a trading fee? do you pay for a stockbroker’s “advice”?