Toronto-based Horizons ETFs Management (Canada) Inc. will eliminate all advisor-class units of its Canadian-listed ETFs because a growing number of advisors are moving to fee-based compensation models from commission-based models, according to a recent announcement.
Advisors will no longer be able to purchase these particular units of ETFs as of Jan. 31 and this class of units is expected to be eliminated fully by the end of April, with advisor-class units being converted into common-class units.
“We launched advisor-class units in Canada within our suite of actively managed ETFs as a bridge to allow commissions-based investment professionals to embrace ETFs and make the transition away from mutual funds with service fees,” says Steven Hawkins, president and co-CEO of Horizons ETFs, in a statement.
“Increasingly, we’ve found that commission-based investment advisors who have become ETF investors have tended to transition to fee-based accounts as well, and we expect this will be a long-term trend in the Canadian investment industry,” he adds. “As a result, we think there will be less need in the future for investment funds, particularly ETFs, to offer embedded compensation to investment professionals.”
As advisor-class units are currently only available on a certain number of the firm’s ETFs, the move will affect less than 1% of assets under management.
The annual management fees of the affected ETFs will be reduced following the conversion of units. The conversion is not considered a disposition and therefore there are no tax implications for investors who currently hold advisor-class units of ETFs, notes Horizons ETFs’ announcement.
Further details regarding the conversion of the units and the new management fees for the affected ETFs can be found through the firm’s announcement.
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