The issue of fees has always been a heartbreaking topic in the mutual fund industry. Regulators want investors to know the truth. But that won’t be until 2026.
“Consumers will better understand the cost of providing advice and managing assets, and they will be able to evaluate and compare the performance of segregated funds and mutual funds,” summarized last year Robert Bradley, President of the Canadian Council of Insurance Regulators (CCIR). The CCIR and the Canadian Securities Administrators (CSA) announced last week an enhancement to the disclosure of the total costs, in percentage and in dollars, inherent in these investments as a harmonized response to the concerns we have identified with respect to the obligations currently imposed on investment funds and segregated funds in terms of cost information, as well as segregated funds in terms of product performance, reads the press release.
The goal is to enable owners of mutual funds, exchange-traded funds, scholarship plans and segregated funds to better understand their costs and value. Investors and policyholders will be better informed about embedded ongoing costs, such as the management expense ratio (MER) and trading expense ratio (TER) that are part of the cost of owning investment funds and segregated fund investments. The insurance directive will also improve the protection of policyholders by making them more aware of their rights to the guarantees provided for in their segregated fund contracts as well as the possible repercussions of their actions on these guarantees, continue the regulatory authorities. Not to mention that some of these fees may be subject to negotiation.
These changes will come into force on January 1, 2026, the time to allow players to make the changes and harmonize their systems. The first enhanced annual reports must be published for the year ending December 31, 2026.
Fees not included
This question of fees receives particular attention in a survey conducted in December for the organization FAIR Canada, dedicated to the defense of investors. The survey solicited feedback from 1,000 retail investors. Most respondents expressed concern about paying too many fees (77%) and said they did not understand the fees charged (63%). Only a third feel very confident about their understanding of investment fees. The survey also shows that only 39% of respondents agree that they get good value for the fees they pay, although this perceived value of advice increases with the amount invested.
Among other findings, nearly 80% of investors use an advisor and most trust their advice completely. “The level of reliability towards advisors can be explained by the fact that most investors have little confidence in them when they want to invest. While a majority of them agree that the integrity of their adviser or investment firm inspires them, they also recognize that they have to fend for themselves when it comes to investing.
More than 60% reported not understanding the fees they pay, and nearly 80% are concerned that they are paying too many fees. “Interestingly, according to the survey, advisors tend to encourage their clients to invest primarily in mutual funds, which typically charge higher fees than comparable products like exchange-traded funds (ETFs). ). Do-it-yourself investors, on the other hand, tend to hold significantly fewer mutual funds and a more balanced proportion of ETFs versus mutual funds,” FAIR writes.