From the Investment Funds Institute ( http://www.ific.ca/ ) we see that mutual fund wrap accounts consist of only 17% of total mutual fund industry assets. That makes sense since they are the new kid on the block, and most people have their money in tried and true, regular, independent mutual funds.
Recent sales statistics, however, indicate that 91% of today’s sales are moving client assets into wrap accounts……..presumably a large percentage of which consist of “house brand” or proprietary products. Are these the new fad, fashion, or are they a such a vast improvement over the old?
The answer is yes and no. No for clients. Yes for salespersons. The Ontario Securities Commission has produced studies which show that by advising clients to purchase the “house brand” fund, (wrap accounts included) the firm and the salesperson share in increased revenues of between twelve to twenty six times. (OSC Fair Dealing Model, Appendix F, on compensation bias in mutual fund sales)
If you have recently been "advised" by your financial professional to move your assets into a house branded product, you have to consider the conflicts they have lept over to get you there. One, they have placed themselves (not you) in a position where twelve to twenty six times more profit goes to them and their firm. Is this good for you? Maybe. Maybe not. Time will only tell. Is it good for them? You bet. 100% guaranteed for them.
Two, they have crossed the line from being your financial "doctor" who prescribes the best solution for you, and they have also become your financial "pharmacist", the person who dispenses the solution. When the doctor and the pharmacist start prescribing to you only house brand medicines, that they are mixing up in the back room, rather than independant products with proven track records, you can be sure your interests have "left the building". Unfortunately that may be what is happening today to 90% plus of Canadians. Time will tell.
Of course the industry made sure that the Fair Dealing Model was never put into place. It was felt that it was too…………..well um,………..fair.
It is factors such as this (among several others) which lead me to conclude that four out of five investment “advisors” are misrepresenting this title and are in fact acting with a selfish sales interest.
This misrepresentation is illegal, unethical, and not in the public interest. Further evidence to this argument can be found by searching for the exact registration category of each “advisor” registered in Canada. Four out of five of these will be found to be also using the “advisor” title improperly, and they are in fact licensed and legally registered in the category of “salesperson”.
