Low-MER investing picks up steam

R elated Stories Investors paying closer attention to fund fees, Maclean’s finds F-class funds more popular with brokers than independent advisors The price they pay (from the June 2003 edition of Advisor’s Edge) Independence daze (from the September 2003 edition of Advisor’s Edge) In keeping with its cost-minimization credo, Dimensional has opted to only deal […]

By Steven Lamb | May 7, 2004 | Last updated on May 7, 2004
3 min read
  • Investors paying closer attention to fund fees, Maclean’s finds
  • F-class funds more popular with brokers than independent advisors
  • The price they pay (from the June 2003 edition of Advisor’s Edge)
  • Independence daze (from the September 2003 edition of Advisor’s Edge)

    In keeping with its cost-minimization credo, Dimensional has opted to only deal with fee-for-service advisors. Steiman says clients are slowly coming around to the idea of paying for advice and those advisors holding onto transaction-based compensation are fighting a losing battle, as the worldwide trend moves toward fee-only compensation.

    He points out that if the best advice is to do nothing, transaction-based compensation leaves the ethical advisor unrewarded for their advice. Fee-for-service advisors are rewarded for their advice while encouraging clients to hold investments over the long-term.

    As clients continue to push for lower fund fees, advisors must move to a compensation structure that values their advice and relies less on shrinking trailer fees.

    “People don’t come to us just because we’re cheap. There are cheap alternatives as well, like ETFs,” Steiman says. “They come to us because of the philosophy and the fact that it’s priced reasonably.”

    The company’s F class funds carry MERs ranging from 0.25% for its Five-Year Global Fixed Bond Fund, to 0.50% for the International Small Cap Fund. MERs rise by 1% for A-class fund units &#151 topping out at 1.50%.

    Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

    (05/07/04)

    Steven Lamb

    • R elated Stories
  • Investors paying closer attention to fund fees, Maclean’s finds
  • F-class funds more popular with brokers than independent advisors
  • The price they pay (from the June 2003 edition of Advisor’s Edge)
  • Independence daze (from the September 2003 edition of Advisor’s Edge)

    • In keeping with its cost-minimization credo, Dimensional has opted to only deal with fee-for-service advisors. Steiman says clients are slowly coming around to the idea of paying for advice and those advisors holding onto transaction-based compensation are fighting a losing battle, as the worldwide trend moves toward fee-only compensation.

    He points out that if the best advice is to do nothing, transaction-based compensation leaves the ethical advisor unrewarded for their advice. Fee-for-service advisors are rewarded for their advice while encouraging clients to hold investments over the long-term.

    As clients continue to push for lower fund fees, advisors must move to a compensation structure that values their advice and relies less on shrinking trailer fees.

    “People don’t come to us just because we’re cheap. There are cheap alternatives as well, like ETFs,” Steiman says. “They come to us because of the philosophy and the fact that it’s priced reasonably.”

    The company’s F class funds carry MERs ranging from 0.25% for its Five-Year Global Fixed Bond Fund, to 0.50% for the International Small Cap Fund. MERs rise by 1% for A-class fund units &#151 topping out at 1.50%.

    Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

    (05/07/04)