All posts by Jonathan Chevreau

Canada’s still-world-beating high mutual fund fees

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Robb Engen, Boomer & Echo

By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

We’ve been beating this drum for years now but a a new study by the Canadian Centre for Policy Alternatives suggests high mutual fund fees could cause Canadians to delay their retirement by as much as 11 years or else leave them with 40 per cent less money for their retirement.

The study compares the management fees charged by mutual funds and pension plans. It finds that in 2014 annual average pension plan fees were 0.38% of assets while comparable mutual fund fees were 2.1%.

Senior Economist David Macdonald, author of the report, says Canada has the highest equity mutual fund fees in the world:

“They’re so high that in order to offset those fees the average mutual fund investor will have to work until age 72 to match what a pension plan holder made by age 65, even with identical contributions.”

Canadians hold more than $1 trillion in mutual fund investments. This chart shows the largest mutual fund providers in terms of assets under management and compares the average MER of their funds: Continue Reading…

How are robo-advisers any different from global balanced mutual funds?

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Depositphotos_6444034_xsBy Jonathan Chevreau

I’ve long been baffled about why the plain-vanilla global balanced mutual fund has not done better in the marketplace.

As I note in my monthly online ETF column at the Financial Post (link below), a global balanced fund (or Global Tactical Allocation Fund) or their ETF equivalents give you exposure to all major asset classes, geographies and industries. You probably have at least two professional managers fretting on your behalf about the underlying stocks and bonds, rebalancing the asset classes, etc.

In short, a global balanced fund should in theory be the mythical “only fund you’ll ever need.” But in practice, and as I note in the column, show me even one investor who has 100% of their portfolio in just one of these funds. Talk about a black swan!

Taking it further, for all the media coverage that robo-advisers have garnered over the past year (and I’ve written a lot about them, both here at the Hub and elsewhere: put robo adviser in the search engine to the right to retrieve them), how exactly is an ETF-based robo adviser different than a global balanced fund?

Just asking! (And if you have the answers, feel free to post comments below.) The first person who can prove to me that 100% of their investment portfolio is in a single global balanced fund will receive a free signed copy of Findependence Day. I’m pretty confident no one will take me up on this offer!

You can find the full FP piece here under the headline (hey, it starts with my name!) Jonathan Chevreau: Where are the ‘robo-like’ Global Balanced ETFs in the Canadian market?

Earlier ETF columns

Links to the two earlier instalments of this new monthly column are highlighted below: Continue Reading…

Of harness racing and asset allocation

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Harness racing. Racing horses harnessed to lightweight strollers.
Harness racing: go Horse #5!

Here’s my latest MoneySense blog, which bears the headline When dividend investing trumps a balanced portfolio.

That’s an accurate depiction of the content but here at the Hub we’re sticking with the more offbeat headline used above. Because this column really does begin with a true story about harness racing in Florida.

How can that possibly relate to asset allocation and dividend investing? Click the above link to find out, or the Hub’s version below. And yes, the happy winner depicted below clutching a winning ticket is my wife, Ruth Snowden.

She’s known in her industry by that name. When we got married more than a quarter century ago she was concerned I might take offence that she didn’t want to use my surname in business circles. My response won’t surprise those who know us: “Honey, you can call yourself whatever you want as long as you pay half the mortgage!”. Of course, the mortgage has long been paid off, consistent with the Hub’s philosophy that “the foundation of Financial Independence is a paid-for home.” Continue Reading…

What Your Life Insurance Broker May Not Be Telling You

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Chantal Marr

By Chantal Marr

Special to the Financial Independence Hub

Before you make an appointment with a life insurance broker you may want to educate yourself about how the system works, particularly with regard to the commissions brokers can get. Although extra incentives and bonuses for insurance brokers are getting talked about more in Canada, there is a lot the general public still doesn’t know. You may be interested in finding out exactly what your life insurance broker may not be telling you.

Most Canadians aren’t even aware of insurance kickbacks for brokers; and if they are, they don’t fully understand what they are, or where and when they take place.

The reason for this is because life insurance companies don’t advertise it, and neither do the brokers themselves. In fact, you’ll see that it could be said that the brokers appear to be more in control of the situation than the actual insurance companies.

Bonuses and Incentives for Life Insurance Brokers

The reason for giving kickbacks to life insurance brokers is that the insurance companies give them these extras so they will only promote their policies to their clients. So most brokers end up only offering consumers policies from a couple of insurance companies, not a selection.

Which of course, doesn’t benefit consumers – who in essence are helping to pay for these extra benefits.

Examples of Incentives for Brokers Continue Reading…

TSX celebrates 25th anniversary of the birth of ETFs

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TSX marks 25th anniversary of 1st ETF. L to R: Atul Tiwari, TSX’s Ungad Chadda, Pat Chiefalo, Mark Yamada. Photo by Jonathan Chevreau

By Jonathan Chevreau

Canada is home to the first ever ETF and today (Monday, March 9th) Exchange Traded Funds celebrated their 25th anniversary at their birthplace — in Toronto, Canada.

TIPs — Toronto 35 Index Participation Units — were the first ETFs in the world and were launched in 1990 by the Toronto Stock Exchange.

To celebrate the occasion, members of the Canadian ETF Association (CETFA) and some media and analysts (including myself) were on hand this morning to ring the bell to open the TSX. Other events are planned in 2015 to further celebrate this 25th anniversary of the ETF.

The ETF industry continues to grow in Canada and reached an all-time high of $86.1 billion in assets at the end of February, with inflows of approximately $2 billion in the first two months of 2015, according to CETFA. It says investors and advisors have embraced ETFs and their benefits, which include low cost and a range of investment options.

Nine providers offer 425 ETFs in domestic market

ETF-25Y-medallion-ROUND-ENNine providers in Canada currently offer almost 425 ETFs. “It’s been incredibly exciting to see the trajectory of ETFs, and their continued adoption in Canada, and globally,” said Atul Tiwari, managing director of Vanguard Investments Canada Inc. in a release.

He is also the incoming Chair of the CETFA (pictured on the far left of above photo.) “ETFs are a powerful tool that give investors low-cost, transparent access to markets with precision, the ETF is arguably the most disruptive innovation the fund industry has seen in decades. Whether its investors, advisors or large institutions, ETFs have really put everyone on the same playing field. ETFs have empowered us all to build portfolios that can truly reflect the unique goals and objectives of each investor.” Continue Reading…