Wednesday, May 13, 2009
Investigations: Canadian Financial Advisors Steer Clients to High-Fee Funds
Canadian mutual funds scored last for their high fees in an international ranking by research firm Morningstar, says this item. While Canadian funds got an overall B-minus grade, they earned a failing F for high management expenses and other charges. One of the chief reasons is a rather troubling conflict-of-interest among financial advisors. They typically get an annual "trailer fee" of 0.5 to 1 percent for each year they keep clients in a particular fund, the study found. The trailers are unique to the Canadian market. Morningstar raised questions about the integrity of some advisors, saying they direct clients to funds that pay out higher trailer fees.