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By Robb Engen, Boomer & Echo
Special to the Financial Independence Hub
One of the strongest arguments made by investment industry groups against banning embedded commissions – or the trailer fees paid to advisors when you purchase mutual funds – is that investors don’t want to pay up-front for financial advice.
Advocis, which represents financial advisors across Canada, as well as the Mutual Fund Dealers Association, believe things are fine just the way they are, claiming, “investors prefer to pay for financial advice through fees that are part of their mutual funds.”
These arguments are used to convince regulators that a ban on trailer fees would only hurt investors, with potentially “devastating consequences” for those who are just starting out and don’t have the means to pay directly for advice.
I’ve tried to debunk this argument in a recent post, stating that it’s up to the investment industry to adapt and deliver new service (and cost) models to meet the needs of consumers.
But a recent study by Morningstar India shed further light on the gap between investor expectations and what advisors perceived to be investors’ expectations.
A third of investors don’t seek professional advice
The study found that over one-third of investors do not seek out professional advice when it comes to their finances, instead relying on their own knowledge or help from family, friends or colleagues.
