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FAIR Canada Urges Reform of Mutual Fund Fee Structure

FAIR Canada has submitted comments to Canadian securities regulators, stating that urgent reforms must be made to the mutual fund fee structure in order to protect consumers. Improved disclosure is important but inadequate to address the serious conflicts of interest presented by embedded (hidden) commissions (referred to as trailing commissions). These conflicts are systemic and structural in nature and are not addressed by current regulatory initiatives. To address these serious issues, we urge the banning of third-party embedded commissions.

Benefits of banning third party embedded commissions include:

  1. Advisors will be more likely to make investment recommendations that are in the best interest of the consumer since the advisor will no longer be incented by higher trailing commissions;
  2. Consumers will know that they pay for “advice” and will have more control over the costs that they pay;
  3. Consumers will be able to assess the value of any service(s) they receive against the costs they incur;
  4. The fee structure will be simplified and made more transparent; and
  5. Improved price competition for mutual funds which should lower the average fees paid by Canadians, which are currently among the highest in the world.

To read our submission, click here.

April 15, 2013