Re: Advertisement: “An open letter to financial advisors from Invesco Canada Ltd.” (IE, Mid-November 2013)

Peter Intraligi, president of Invesco Canada Ltd., lays out Invesco’s position in regard to the Canadian Securities Adminstrators’ discussion paper on mutual fund fees. That position is filled with unsubstantiated assertions, while conspicuously silent on a number of important related matters.

Allow me to address a few of Invesco’s assertions:

Invesco’s position: Banning embedded compensation will have “serious unintended consequences.”

Comment: No one can reliably predict the future. Invesco offers no comment on the intended consequence of ending embedded compensation – the removal of bias. How does Invesco feel about that?

Invesco’s position: Eliminating embedded compensation will make financial advice unaffordable for small investors.

Comment: Invesco does not define the term “small investors.” At any rate, the argument is spurious. If current clients are working with current advisors using current embedded compensation products, then it logically follows that simply changing the format of billing will have zero impact on the viability of the relationship. It’s a zero-sum game.

If a client is buying mutual funds that pay an advisor 1% in trailing commissions and commissions are banned, the advisor could simply bill the client 1% and everything else about the economics of the relationship (including the financial viability of the client to the advisor) remains unchanged. The only differences are that:

– the cost of advice would be transparent (something Invesco purports to favour);

– the cost of the advice may be deductible;

– the advisor and client could elect to substitute lower-cost products for current products, thereby lowering client cost, increasing advisor compensation – or both.

Invesco’s position: Small investors will be forced into a do-it-yourself scenario.

Comment: More presumed clairvoyance from Invesco. I seriously doubt that banks would stop taking small clients. Is there even a shred of evidence to support this position?

Invesco’s position: Embedded compensation is not a primary driver of sales.

Comment: Some of the very best mutual fund companies in Canada pay no or virtually no trailing commissions and simultaneously receive no or virtually no support from financial advisors.

If compensation is not the determinant here, then Invesco needs to explain why most advisors’ assets under management for these [commission-less] companies rounds to zero.

John De Goey
vice president,
Burgeonvest-Bick Securities Ltd.
Toronto

 

Next: Fintrac retaining too much data
@page_break@
Re: “FINTRAC retaining too much data,” (IE, Mid-November 2013)

This situation is far worse than Fiona Collie points out in her excellent article.

Under the Proceeds of Crime Money Laundering and Terrorist Financing Act, all registered plans, such as RRSPs, tax-free savings accounts and registered education savings plans are specifically excluded from client identification and record-keeping requirements.

Yet, practically all financial services institutions (banks, trust companies and credit unions) collect and retain their customers’ confidential information for registered plans.

Despite my protests that financial services institutions could be breaking privacy laws, these institutions continue to collect confidential information where it is not required.

The Financial Transactions and Reports Analysis Centre of Canada is not living up to its commitment to supervise financial institutions, and the Office of the Privacy Commissioner, despite her public protests, has not yet taken one financial services institution to task for the possible misuse of this data.

Therefore, due to the lack of proper supervision and enforcement, as far as registered plans are concerned, it’s sort of a “Wild, Wild West” out there – where anything goes.

Glenn Szlagowski
senior deposit broker,
Kitchener, Ont.

© 2014 Investment Executive. All rights reserved.