Topic: How To Invest

What is Pat’s commentary for the week of June 24, 2014

Article Excerpt

There’s a revolution brewing in Canada’s brokerage industry. Canada’s provincial securities commissions are looking at three longstanding practices that help the brokerage industry and securities salespeople, but represent a steady drain on the finances of many investors. Trailer fees and other “embedded” fees. Mutual fund buyers now pay a yearly fee or Management Expense Ratio (MER) of perhaps 2.5% of the value of most mutual funds they invest in. One and a half percentage points generally stays with the fund company, to pay for management of the funds, record-keeping, administration and so on; one percentage point goes to the securities firm where the investor bought the fund, to be shared between the firm and the salesperson. The idea is that this fee goes to pay for continuing advice to the investor. The fund company continues to charge the 1% to the investor, and pay it to the brokerage firm, every year for as long as the investor owns the fund. This “trailer fee”,…

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