Ban on embedded fund compensation wouldn't eliminate conflicts

What to expect if dealers can no longer be paid with trailer commissions

Rudy Luukko 1 December, 2017 | 6:00PM

This year's intense debate over the fate of embedded advisor commissions paid by mutual funds pits two powerful camps against each other that have seemingly irreconcilable differences.

In favour of changing the ground rules are various investment-industry participants, consumer-advocacy groups and regulators. Their arguments concerning conflicts of interest, high fees and lack of transparency are well documented in the consultation paper released in January by the Canadian Securities Administrators. As regulators have repeatedly emphasized, the status quo is not an option.

The opposing camp positions itself as the defender of consumer choice and preservation of access to advice for small investors. The anti-ban proponents include most mutual-fund companies and commissioned advisors, along with their trade organizations.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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