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Better Investment Fees Disclosure is Proposed

Better Investment Fees Disclosure is Proposed

May 17, 2022

Investors can look forward to enhanced disclosure of investment fees and costs on the mutual funds and ETFs they own, writes Peter Watson.

This is a good thing, and it is a follow-up to cost disclosure requirements that were implemented in 2016. The new standard of disclosure is at the proposal stage and the objective is to have it effective in 2024.

This effort is being made by regulators in both investment and insurance sectors in order to provide harmonization of standards. Historically this has not been the case.

Clients will be able to see the fund expense ratio that will include both the management expense ratio (MER) and the trading expense ratio (TER). This will be expressed as both a percentage and in dollar terms.

Management Expense Ratio covers the cost of operating a mutual fund.

Trading Expense Ratio is a less understood. When securities within a mutual fund are bought and sold there can be a charge.

In addition to providing better cost transparency the regulators commented this might lead to enhanced competition in ministry.

This is another positive step for the investment business. Canadians rely heavily on access to good investments and also good investment and financial planning advice.

When people have better ability to understand the costs, they are in a better position to determine if they are getting good value for money paid.

That’s basically how capitalism works. It is a two-part process. Understand the cost, determine your level of satisfaction. Then decide what and where you will purchase goods and services.

This proposal for enhanced fee disclosure is a good step for the industry. And a very good step for investors.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Watson provides wealth management services through Watson Investments. He can be reached at www.watsoninvestments.com