Vanguard supports CSA’s mutual fund fee proposals

In June, the OSC will host a roundtable to discuss the CSA’s paper on mutual fund fee disclosure.

Read: CSA to scrutinize mutual fund fees

Leading up to this event, the regulator had asked for comment on the paper by April 12, 2013. From the list of submissions, it will compile of group of investors, mutual fund industry reps and other industry stakeholders to take part in the industry panel.

Read: OSC seeks comment on CSA discussion paper

In response, Vanguard Investments Canada offered insight on the top points brought forward in the CSA’s paper.

Atul Tiwari, managing director, starts his letter by saying, “Mutual funds and ETFs are two sides of the same coin…[and] at Vanguard, we believe in the value of advice that financial advisors provide…In particular, we are supporters of the fee-based model for advisors, as this model provides investors full transparency.”

Read: Cut fees and boost profits

The top seven discussion points he discusses include:

Advisors’ services must be specified/provided in exchange for trailing commissions: The letter states, “This can be achieved through additional disclosure.”

Read: How to frame fees

There needs to be a standard class for DIY investors offering no (or reduced) trailing commissions: While F-class and D-class shares do offer this type of feature for other investors, Tiwari says, “The DIY investor…does not currently have access to [an equivalent] share class without a trailer fee.”

Read: Beware DIY account transfer costs

Trailing commissions should be unbundled and disclosed as separate, asset-based fees: This issue is currently being addressed via new initiatives like the proposed CRM rules and point of sale disclosure requirements. So Tiwari says, “Any further proposals concerning the transparency of fees cannot be adequately evaluated” until these new regulations are in place.

Mutual fund manufacturers shouldn’t set advisors’ compensations: The letter states, “Regulators should provide an acceptable method for assessing and paying the costs associated with fund distribution. [Vanguard] supports disclosure of the fact that a fund pays a third party intermediary for distribution.”

To read more comment submissions on the CSA paper, click here.

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