Assante latest fundco to cut fees

(January 10, 2005) Assante is cutting fees on its Optima and Artisan fund products, in the wake of a similar move by Fidelity, whose fee reductions take effect today.

“The cost of participating in Assante Optima Strategy and Assante Artisan Portfolios will be reduced by approximately 0.35%,” said Assante senior vice-president Darin Thompson in a memo sent to the firm’s advisors last Friday. “This has come about through increased cost efficiencies over the past year, which has allowed us to pass the savings on to your clients.”

For the Optima products, operating expenses are dropping 0.19% and the fees are going down 0.15%, for a total reduction of about 36 basis points (including GST). Artisan’s portfolio management fee will be reduced by 0.30% while operating expenses fall 0.02%, for a total of 34 basis points, with GST.

As a result, 11 Artisan portfolios now have a new management expense ratio (MER) of 2.86% in the class A version and 1.79% MER in the class F version.

Toronto-based Assante advisor John De Goey says the cuts are a step in the right direction, but are too little to really benefit consumers.

“This is the kind of thing advisors were requesting four years ago,” he says, while conceding that in the firm’s early days, fee reductions weren’t a possibility as Assante attempted to build the firm.

“There were significant start-up and technology costs,” he says. “The economies of scale could not be realized in the short-term and I understood that. Most advisors felt the same way.”

Assante was purchased by CI in 2003 and that led to an expectation among the company’s advisors that fees would come down, De Goey notes. “The good news is the cost savings are here, the bad news is that it took 15 months.”

In November, Fidelity announced plans to reduce the MERs on all of its equity, balanced, asset allocation and high yield funds by about 20 basis points and to cut fees on fixed-income and money market funds by approximately 30 points. Those reductions take effect today.

“The price war is on,” says De Goey, “but it’s more of a price spat,” he quips, since to date, few other fund companies have followed suit.

In December, Scotia Securities announced it would reduce fees on eight of its mutual funds, ranging between 5 and 50 basis points, effective February 25, 2005. However, at the same time Scotia increased fees on six other funds.

Still, De Goey thinks that if it weren’t for Fidelity taking the lead, “Assante likely wouldn’t have done this.”

And, as a fee-based advisor, De Goey says he’s concerned about the “clear disconnect” between his business model and that of Assante advisors who use the firm’s proprietary products. “They’re openly allowed to make up to 10% more than advisors who use their fee-based platform.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com