It seems over the past year there have been a tremendous number of articles written about the high cost of advisor charges, commissions, trailer fees and the lack of transparency for clients to understand what they receive for them. In the case of the Canadian Securities Administrators (CSA), a number of changes have been implemented over the past several years with the most enlightening taking place this year.
Starting in July 2016, investment dealers began sending out two new annual client reports: one showing how investments have performed (“Investment Performance Report”) and the other disclosing the various fees and compensation amounts that have been paid on accounts (“Charges and Compensation Report”).
This report will provide clients with details about the performance of their investments over the past year and the services provided to them. It will show the net performance of investments after all costs have been deducted and will include a personal rate of return. The returns are calculated using a consistent industry-wide calculation known as the “money weighted” method (click here to learn more about how this return is calculated).
This report breaks down the charges to your account into three sections:
General Administration Fees: includes administration fees, transfer fees, fee-based account charges (if applicable), de-registration/re-registration charges, and trustee fees (or nominee fees).
Specific Transaction Fees: includes amounts paid for specific purchases, sales or other transactions, such as: fee for switching to a different fund or product, mark-up fee, front-end sales commission or back-end (DSC) sales charges.
Other Compensation: includes payments received by investment managers or others who provide services to your account, such as: commission from investment managers for DSC investments, dealer portion of management fee rebate, payment from GIC issuers, and trailing commissions.
The combination of these three sections will show the total amount required to service the account.
We at Arbutus Financial are excited about these upcoming changes. We look forward to an open dialogue with our clients. One size does not fit all and each client is unique; we pride ourselves on finding solutions to clients’ wants, needs and issues. We look forward to continuing to serve you and invite questions about our services, charges or costs.