Mutual funds remain good and suitable for the majority of Canadian investors despite the controversy brought about by allegations of marketing timing, according to a panel of industry leaders at the 18th Annual Conference of the Investment Funds Institute of Canada today in Toronto.

Karen Fisher, managing director & head, mutual funds, fee-based product development and wealth management, at Bank of Nova Scotia said funds remain a viable way for Canadian investors to achieve a diversified portfolio.

Bruce Gordon, senior executive vp and general manager (Canada), Manulife Financial reminded the audience of the value the fund industry brings to investors, saying most investors “couldn’t do this on their own.”

He said his firm hasn’t been inundated with questions from clients on market timing. However, he added that the “spotlight on the issue is eroding trust.”

Using a health care analogy, Robert Frances, president and CEO, PEAK Financial Group, warned that if the focus on high net-worth clients continues, squeezing out everyone else, the industry could end up providing two-tiered advice. He added that in the absence of good advice, the industry is setting itself up for malpractice suits.

He lamented that there are few independent fund dealers left, but said there is still investor demand for independent advice. He said advisors don’t want to be seen to be in a position of having a conflict of interest, real or perceived.

Frances added that investors are not as price sensitive as the fund industry believes, but they are value sensitive. He compared buying funds to getting a haircut, saying few people choose the cheapest barber, but they do seek out the best cut for the money.

He also said there has been no significant reaction from clients regarding market timing, and added that some advisor don’t seem too concerned, either. However, he said that many advisors say they are concerned about needing to explain market timing to their clients, and to avoid this they may recommend a different product entirely.

Ned Goodman, chairman, Dynamic Mutual Funds Ltd. went on the offensive lashing out at critics who always seem to focus on the negative aspects of fund industry. He said the “industry has been sensationalized by a biased media.”

Goodman said the amount of money involved with market timing is very small compared with the losses caused by Nortel’s stock collapse.

Referring to the fines levied against U.S. fund companies for market timing by New York Attorney General Eliot Spitzer, Goodman expressed concern that regulators “will try to exact Spitzer-like fines from the tiny Canadian industry.”

He reminded the audience that market timing is not illegal and that a probe by the Ontario Securities Commission has found no evidence of illegal late trading.