Canadian Investors – The Regulators Do Not Have Your Back.

Dear Canadian Investors: you’re own your own. Or should I write ‘Poor” Canadian Investors?

Those that regulate the Canadian Mutual Fund industry do not have your back. That’s been the case for many decades, so let’s just say that not much has changed. Canadians pay the highest mutual fund fees in the developed world according to many studies including a recent Morningstar study that looked at 25 nations. Those high fees have been the norm for many decades. That average mutual fund fee is over 2.2% annual. Yes, on average, they’ll take that chunk every year in good years of investment returns and in bad years of investment returns. They always get paid. It’s just like those wonderful Questrade television ads that suggest clients should pose the tough questions to their financial advisors. In one of those ads the poor guy realizes that everyone is getting paid ‘but me’.


The regulators have stood by and watched as Canadians continue to pay those high fees, decade after decade after decade. They’ve got someone’s back alright. The Mutual Funds Dealers Association of Canada and the Canadians Securities Administrators and Investment Industry Regulatory Organization of Canada regulate the mutual fund industry. In Quebec we also have the Chambre de la securite financiere. 

There was some movement in an attempt to address the high fee situation in Canada and to address the fact that most Canadians are not aware of the fees that they pay, or how those fees are paid. Yes, the regulators are aware that Canadians are not aware. So there were some disclosure rules put in place so that mutual fund dealers would have to show on annual statements the amount of fees paid. The problem is, the annual statements that are required are not required to actually show the TOTAL fees paid. No, I’m not making this up. In an attempt to educate Canadians on the amount of fees they are charged, the statements are only required to show a portion of the fees. And the amount shown on the annual statements is usually a smaller portion of the actual fees paid. Obviously, it’s not an attempt to clearly educate Canadians on the total fees that they pay. 

If we wanted Canadians to be aware of the total fees that they pay, we would regulate that the financial industry must report the total fees that Canadians pay? Common sense?

Instead the annual statements might ‘unwittingly’ lead to confusion or a misdirection on fees paid. The amount on the statements must show the fees that the mutual fund dealer has charged you. The dealer is the advisor that ‘sold you’ your fund. The fee or monies that it takes to create and manage the actual investments (management expense) is not shown. In a fund that has a total fee of 2.5%, the percentage going to the dealer (advisor) would typically be 1%. That other (larger) 1.5% is not accounted for.

After more consultation and studies the regulators (CSA) recently came out with another series of mandates and questions for further consultation. There was a positive move or two, but nothing to answer the big questions, such as how to educate Canadians on fees or to show the total fees that they pay. Many countries have eliminated those embedded fees (trailing commissions) paid to the mutual fund dealers, so that there is more transparency. That was on the table in Canada, but regulators indicated that they will not go that route. There is certainly a lot of outrage out there on the lack of protection for Canadian Investors. There are many open letters to regulators, with many smart, well meaning individuals and groups offering up suggestions and ideas. Personally, I think it’s all like pushing on string. Another phrase that would come to mind is falling on deaf ears.

On the regulation front I do agree with Ken Kivenko, a very determined and tireless investor advocate who operates

 “In the face of this unsatisfactory state of affairs it is time to seriously consider the establishment of a national financial consumer protection agency independent of existing federal and provincial regulatory agencies …”

We need an agency that will stand up for Canadian investors. But will more oversight help our oversight problem? I honestly applaud the many advocates for (still) trying, still pushing on that string. 

I mostly take a different approach. To Canadian Investors I’d suggest the obvious that regulators don’t have your back, but many others do have your back. I have your back. If you check my site, you’ll see the many companies that also have your back. The Canadian robo advisors have your back. That includes investment offerings at major banks such at Tangerine and BMO with their Smartfolio offering. Tangerine Investment Portfolios are mutual funds, but they are offered at fees that are less than half the industry average. The exchange traded fund industry that is dominated by iShares and Vanguard has your back. There are mutual fund companies such as Mawer and Steadyhand that have your back with sensible advice and lower fee options. Steadyhand President Tom Bradley recently offered that it was A Bad Day for the Canadian Investor

Instead of trying to fix the mutual fund industry, let’s just say goodbye and leave the traditional high-fee mutual fund industry behind. As I wrote in my first blog, it’s horse and buggy. I know that the mutual fund industry is broken, and I don’t think it’s going to be fixed. Some things are just not worth the effort. I’d rather concentrate on the positive, moving to the positive and that includes the many simple low fee investment options available to Canadians.

I named my site Cut The Crap Investing. The ‘Cut’ part means cut and run from those high fee investments. We can leave the regulatory crap behind as well. If you can’t beat ‘em, leave ‘em. It’s my mission, and the mission of many others in the financial industry to help Canadians move to sensible low fee investments. I can help (no charge) and so can many others. I’d suggest you read and head to, for starters.

The fact that the Canadian mutual fund industry has its “issues” does not have to be a problem, because there is a simple solution. There are many simple solutions. And yes, at the same time we should still put pressure on the regulators and the mutual fund industry as Canadian households are still largely invested in traditional high fee mutual funds, and that trend has not changed fast enough.

The only event that will really work is Canadians talking their monies elsewhere. Money talks. Money that walks speaks loud and clear. Once again, Canadians, it’s time to cut the crap and say goodbye to high fee investing and say hello to keeping more money in your pocket. Drop me a note and I’ll show you how easy it is. Breaking up is not hard to do. 

Dale @ 

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