The investment management industry in Canada is in the midst of a massive overhaul, led by the new disclosure required under Client Relationship Model 2 (CRM2) that took effect July 15, 2016. CRM2 will require long-overdue disclosure relating to the total fees that investors pay for investment advice. The biggest impact will be seen in relationships where a mutual fund or financial advisor puts their client into ABC Mutual Fund, and then the financial advisor earns a hefty trailer fee for that “advice”.
The excessive mutual fund fees in Canada have been driven by the multiple and redundant layers of “advisors” that try to control and erode your hard-earned savings with fees. Here is a quick overview:
Portfolio Managers: AFINA is registered as a Portfolio Manager with the Ontario Securities Commission, a Provincial Government entity, and we can provide discretionary investment services DIRECTLY to clients. Portfolio Managers in Canada must hold either the rigorous Chartered Financial Analyst (CFA) Charter or Canadian Investment Manager (CIM) designation and fulfill investment management experience requirements. Portfolio Managers decide what stocks, bonds or other securities to buy or sell for individual investors, corporations, foundations, family offices and many other types of entities.
Advisors: Mutual Fund Advisors, Financial, Investment Advisors and Financial Planners are all titles of those employees that are essentially third-party sales people for the large mutual fund and investment fund companies. These types of Advisors are typically self-regulated and oversight is not directly provided by the Provincial securities regulators. This sales and distribution layer adds roughly 1% to the annual cost that investors pay, which generally adds up to thousands of dollars in extra fees over a one’s lifetime. These advisors CANNOT buy securities for their clients directly and must seek the advice of a Portfolio Manager.
At AFINA, we always pride ourselves with two key goals: (1) Transparency of fees and costs that investors pay for our services, and (2) investing our own personal savings in the same investments that we recommend for our clients, otherwise known as “putting our money where our mouth is.” As it relates to the transparency of fees, our clients have ALWAYS received monthly detailed statements from our partner National Bank Correspondent Network (NBCN) that show the management fee that our clients pay to us, and the trading commissions paid to NBCN.
As investors seek alternative solutions to the high fees charged by bank, insurance and mutual fund advisors, we are proud to launch three new low-cost exchange traded fund (ETF) products that are geared to clients that would rather pay fees of 0.65% for our passively-managed product versus average Canadian mutual fund fees averaging 2.40%.
We have also launched our flagship AFINA Affinity actively managed product on the NBCN platform, which has the same investment style and strategy as the AFINA Affinity Fund LP that is up 14.9% in 2016. Fees for this actively-managed product start at 1.55% for investments over $200,000 and drop to as low as 0.65% for investments over $2 million.
The AFINA Income Managed Account is our selection of four Vanguard Canada dividend and fixed income exchange traded funds (ETFs) with a 15% allocation to a high-income savings account that is equivalent to cash.
The AFINA Balanced Managed Account is our selection of five Vanguard Canada equity and fixed income exchange traded funds (ETFs).
The AFINA Optima3 Managed Account is our selection of three Vanguard Canada equity exchange traded funds (ETFs).
The AFINA Optima10 Managed Account is a portfolio of our top 10 North-American equity selections, with a bias towards dividend-paying companies. Each of the 10 equity positions will have a weight of 8.5% – 9.5% at each re-balancing event, with cash comprising the balance of the portfolio.
The AFINA Affinity Managed Account is a portfolio of our North American equity selections. The number of positions will range from 20-35 depending on market conditions. Each equity position may have a weighting of between 2% and 5%.