Investors, Fees, and Transparency

Financial illiteracy is rampant, which is why most of us rely on professional advice. But what about when the pros aren’t transparent? Will the industry have to shift based on consumer reactions? MacDonald’s Law of Business Ethics: “If your business model relies upon customers not understanding your business model, your business model is not an ethical one”. >>>

Investors in for ‘sticker shock’ with fee disclosure rules

New transparency rules coming into effect will be a boon to sales of exchange-traded funds as more Canadian investors find out how much of their hard-earned dollars are going to paying investment fees rather than bolstering their retirement nest egg, said Susanne Alexandor, managing director and head of wealth management at Cougar Global Investments Inc.

“As client fees become more transparent, some investors are going to get sticker shock in what they are paying, particularly if they are in mutual funds with high MERs [management expense ratio fees],” said Ms. Alexandor, who constructs globally diversified portfolios of ETFs for high-net-worth clients. “As a result, investors are going to be drawn to lower-cost options such as ETFs.”

ETF fees can vary depending on the investment mandate but average around 0.5 per cent. A high-end ETF can charge up to 1.5 per cent while some mutual fund fees can be as high as 2.5 per cent.

Industry regulators have been pushing for greater transparency of fees for some time….