Commission-free advice from three top managers

These three firms are finding ways to avoid charging embedded commissions.

Jeffrey Bunce, CFA 21 March, 2017 | 5:00PM
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In January, the Canadian Securities Administrators published its long-awaited consultation paper in which it considers a ban on embedded commissions. Among other things, the regulators’ research indicates that embedded commissions paid to financial advisors may encourage dealers and reps to favour funds that pay the highest trailer, rather than those that provide the best value. The CSA is now seeking comment on whether to make a switch to a direct pay model.

As it seems more and more likely that the Canadian regulators will indeed move towards this model, there are ways for you as an investor to get a head start on the trend. Three managers in particular, all with top marks in our parent assessment, have direct-to-investor distribution strategies that don’t require you to use an outside advisor or pay any commissions, embedded or otherwise.

Mawer Investment Management may be the best known for this in the industry. Through its subsidiary, Mawer Direct Investing, you can access the firm’s team of investment advisors that will recommend an investment mix using Mawer funds. That’s an attractive proposition since many of Mawer’s funds receive Medalist ratings and most have outperformed their benchmarks and peers.

Steadyhand Investment Funds also has a team of advisors and a core lineup of funds to help you achieve your investment goals in a clear, transparent manner. The firm only offers one share class of its funds, with no embedded commissions, and offers fee reductions at certain asset levels and the longer you stay invested. Both its Equity Fund and its Income Fund garner Morningstar Analyst ratings of Silver.

Lastly, Leith Wheeler also offers investors the opportunity to invest directly with the firm without the burden of embedded commissions. Like Mawer and Steadyhand, the firm is employee-owned, with its investment personnel in charge of the decision-making. That has led to a stable team and approach focused on finding value. Both the firm’s Canadian Equity fund and Core Bond fund receive Morningstar Analyst ratings of Bronze.

It’s important to note, though, that these are non-discretionary arrangements, so you remain in control of your investments, and it's up to you to contact the firms to make changes to your investments and asset mix.

The hurdle to directly access these managers varies. Steadyhand is the most accessible, with fund minimums of $10,000. You can open an account directly with Leith Wheeler if you have at least $25,000, and it’ll take $50,000 to start an account at Mawer. All offer balanced funds, though, that will get you exposure to the firm’s standalone strategies.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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