Increasing Fee Disclosure in the Investment Industry

There’s nothing like a weakening stock market to turn everyone’s attention to the cost of their investments. And as it should be. In a strong market I may be willing to give up 2-3% if I can make an 8-10% return overall, but if the markets turn south and I’m fighting for every bit of return I can get, I am going to start paying closer attention to all the fees and commissions standing in my way.

Rob Carrick’s article,Fee-based financial advice: Here’s how to find out if you’re paying too much in the Globe and Mail this weekend promotes a new tool developed by the G&M to compare advisor fees amongst investors. His article also promotes our tool to compare commission structures between mutual funds and ETF’s.

There is no shortage of initiatives coming down the pipe that will draw even more attention to the overall costs of investments. Next spring, investors will start receiving the Fund Facts disclosure document before they are allowed to buy a mutual fund in an effort by regulators to better inform investors about their mutual fund purchase. Next summer, new regulations will require dealers and their advisors to send investors new statements that show the total amount of fees paid. There is growing support to eliminate embedded commissions from mutual funds as they’ve done in the UK and elsewhere. The list goes on.

There is no doubt that the move towards greater disclosure, transparency and focus on the overall cost of investments will only increase. The financial crisis of 2008 was the catalyst and recent market softness has renewed the commitment of those intent on educating investors about their portfolios. But while most dealers and advisors are taking steps to prepare for this added scrutiny, I can’t help but think a good bull run up in the markets would help lessen any price sensitivity.

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