Three Big Elephants in the Room
Nominee
&
Client Name
Embedded
&
Exposed Fees
MFDA
&
IIROC
Three Big Elephants in the Room
Nominee
&
Client Name
MFDA
&
IIROC
Embedded
&
Exposed Fees
George Aguiar
Patti Best
Mark Kent
John Webster
President and CEO,
GP Wealth Management
SVP Client Experience,
Mackenzie Investments
President,
Portfolio Strategies
President,
Queensbury Securities
NOMINEE & CLIENT NAME
Client Name Accounts versus Nominee Name

Embedded Trustee Fee

Transparent Trustee Fee

Potentially limits investment
options

Quicker trade execution/less
cumbersome trading

Generally requires paper trail

No trade forms

Dealer/Advisor have limited
control on the account (example,
Transfer out)

Dealer/Advisor have higher level
of control on the account

Direct Reconciliation

Fund redemption settles to cash
Fund redemption can settle to
clients bank account

Dealer/Advisor has direct control
of client service experience
Dealer/Advisor has partial control
of client service experience

Dealer/Advisor controls trading




3rd Party Reconciliation
Dealer/Advisor at risk of direct
trading
NOMINEE & CLIENT NAME
EMBEDDED & EXPOSED FEES
A number of factors may threaten the commission-based model of the
financial advisor. Meanwhile the fee-based model adoption is slow to
emerge.
Factors threatening the traditional commission based model
Other jurisdictions are regulating
a fee for service approach
•Britain and Australia
have taken steps to
eliminate commissions
as a form of advisor
remuneration
Revenue stream volatility
•For a maturing advisor base,
predictable revenue in a feebased model represents an
attractive degree of stability
Media and regulatory focus
•Since the financial crisis,
there is increased scrutiny
placed on advisor
remuneration and value
delivery
ETFs and ETF portfolios
•ETFs are an increasingly
important asset class and ,
for the most part, do not
have compensation
embedded in their fee
structures
Fee-based model slow to emerge in the financial advisor channels in Canada, meanwhile full-service brokers lead the charge
Share of assets in fee-based programs
Advisor fee-based adoption rates
85.0%
53.7%
0.9%
8.2%
FA-MFDA
FA-IIROC
28.3%
5.4%
FSB*
FA-MFDA
FA-IIROC
*Includes non-discretionary (FBB) and discretionary fee-based programs (AM, IHMW and SMW)
1Source: Investor Economics Retail Brokerage Report and Distribution Advisory Service; FA-IIROC includes MFDA firms with an IIROC
platform e.g. Assante, Manulife, Peak.
FSB*
EMBEDDED & EXPOSED FEES
MFDA & IIROC
END
From Wikipedia
"Elephant in the room" is
an English metaphorical idiom for an obvious truth
that is either being ignored or going unaddressed. The
idiomatic expression also applies to an obvious
problem or risk no one wants to discuss.[2]
It is based on the idea that an elephant in a room
would be impossible to overlook; thus, people in the
room who pretend the elephant is not there have
chosen to avoid dealing with the looming big issue.