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he investment advisory business model is broken. As other aspects of commerce continue to improve, the investment business is lagging. One significant problem is fees. The relationship you have with your investment advisor should represent good value and in order for that to happen, some changes need to be made. Any improvements to the investment industry would be positive. As more people are retiring without company pensions, their investments will play a huge role in their ability to be financially independent during retirement. The number of retirees is escalating because of our aging population and will continue to escalate because the leading edge of baby boomers is now over age 65. The end result is that more Canadians will depend on their investments for retirement income. There are advantages and disadvantages to investment advisor fees. The disadvantage is that what you pay in fees reduces your return on investment. There is an inherent conflict of interest built into the system. You Beware of hidden fees from investment advisors 11 · Thursday, March 1, 2012 OAKVILLE BEAVER · www.insideHALTON.com T Dollars & Sense By Peter Watson want low fees but your advisor would like to be paid more. On the positive side, if you receive valuable advice that leads you to achieving your long-term objectives, then there could be an advantage to paying investment advisor fees. In a perfect world, we would like to get excellent service at a fair price; that recognizes the value of good advice but as stated, the cost should be fair. In theory, this makes perfect sense. However, practically, it is not that easy. Investment fees are often hidden. Some investors are not even aware they actually pay investment fees. How can a consumer make an informed decision on the fairness of investment fees if they don't know what fees are being charged? A healthy professional relationship should include transparent pricing. Is our industry's outdated system of hidden fees in the client's best interest? A recent newspaper article reported the new Chairman of the Ontario Securities Commission has pledged to build, "confidence in the investing process by exploring the pros and cons of mandating fiduciary duty." Lawyers and accountants have a fiduciary standard of care, which fosters a greater degree of trust. They charge fees that are easily understood by clients. Reform on remuneration has been introduced to the investment industry in Britain and Australia. Perhaps Ontario will follow suit, but in the mean time you can implement your own reforms immediately. Meet with your advisor and request a summary of all investment related fees. This will include the advisory fee, investment fee and any administrative costs, such as an annual RRSP administration. Don't forget to ask for the MERs (management expense ratios) on any mutual funds you hold, as well. Request that fees be communicated to you on a regular basis so you can easily monitor them. If it is not already the case, request that a fee discussion be a regular part of your ongoing communication. It might be simpler to discuss the advantages of converting your investments to a fee for service account so fees are reported on future investment statements -- there might be some income tax deductions that you can use to reduce your tax bill. Our advice is to be pro-active, understand the investment fees you are paying and ensure you are satisfied with the level of service. You do not have to wait and hope the investment industry implements a more transparent fee system. Now is the time to have a fee conversation with your investment advisor. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. NOW OR NEVER Purchase a Carrier Hi Efficiency Furnace and Receive a DON'T MISS OUT! LIMITED TIME OFFER! 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