Fees lower than ever, fund exec says

While the jury is still out on whether the public cares about mutual fund fees, all-in costs on funds have in fact never been lower, according to David Feather, president of Mackenzie Financial Services. And considering the value of the advice and management they pay for, investors are getting their money’s worth, he claims.

“It is a misperception that all-in fees have not gone down in Canada to the benefit of the investor,” he said, speaking Thursday at the Mackenzie University road-show in Toronto. “I think we have done a good job in the last few years getting the MERs down a bit each year on our big funds and we’ve put alternative classes in for bigger accounts.”

He points out that investors are saving through lower MERs and the elimination of trustee fees, RSP fees, transfer fees and other ancillary fees. Investors who remain sensitive to the fees they pay really should consider the value of the advice they receive.

“We believe that in the current price environment, where a client has a good advisor and has been in good product, then the client has been well served,” he continued. “We are not going to be leaders in making pricing decisions that affect compensation to the dealer, the advisor, or the fund companies.”

Some of the lowest cost funds available to investors are provided by the major banks, where no-load structures, combined with low MERs, have been embraced by investors, especially in the monthly income category.

“My hat really is off to the banks, because they’ve done a great job here,” Feather says. “They saw a need, they nailed it and these actually are fairly high quality products.”

But he questions the quality of delivery on these funds, saying that only CIBC offers “truly open-architecture financial planning shelf.” Feather believes much of the sales in the bank’s monthly income funds come from clients investing independently of their advisor.

Starting this week, Mackenzie will offer the ability for advisors to submit a standing order on behalf of their clients, to have all DSC fund units converted to front-end load versions as the redemption schedule matures.

“Up until recently, we’ve allowed the switch of a back-end fund to the same fund with a very simple form that requires one signature,” he told the audience. “We’re taking this one step further and making this client letter into a standing instruction. Once you get a client’s signature once, it will be a perpetual standing instruction.”

After receiving this authorization, Mackenzie will sweep the client’s account once a year, switching back-end load fund units to front end units of the same fund automatically.

He says this process is probably safer for the advisor than the automatic rollover offered by “one of our competitors,” as the regulators appear to require client acknowledgement of a change in compensation structure.