LET’S TALK ABOUT FEES

Lately, there seems to be a lot of noise generated by the banks and online trading platforms about fees. In speaking with our clients, we have discovered that there a lot of misconceptions about the percentage and different types of fees. In some cases, clients have been misled by online trading platforms and local bank branches into believing that they are much lower-- or have no fees at all. And of course, the biggest issue is always what’s not discussed – the value of advice. It has been documented, and in the news,that the banks brokerage firms have taken in mutual fund trailer fees to compensate them on advice they did not provide.

Its important to compare apples to apples. ​  

Did you know that there are several different types of account management fees?
 

1. the advisory fee that is paid for the management of your account (in this case Frost Wealth Management) and on non-registered accounts, that fee is tax deductible
 

2. the product cost for the management of the mutual fund that you are invested in. This is often referred to as MER (management expense ratio). Lower fees are paid on ETFs (Exchange Traded Funds) and there are no product costs associated with stocks.

As iA Securities is a dealer member of IIROC (Investment Industry Regulatory Organization of Canada), Frost Wealth Management (FWM) adheres to IIROC regulations. Most of our client accounts are feebased, which means that we charge a flat fee of 1% to 1.5% depending of the size and complexity of your portfolio. 

Your advisory fee is clearly shown on the fee-based agreement that you signed with your account opening documents. It is clearly visible on the statements that you receive from HollisWealth (soon to be iA Private Wealth) and on the recap sent to you in January. We also post the percentage and an estimate of your annual fees on page 5 of your meeting agenda at every review. As your portfolio grows, we endeavour to lower your Frost Wealth Management advisory fee. If you are concerned about fees, please bring it up at your review or book a time to discuss. Complete transparency is a cornerstone of how we do business. We appreciate an opportunity to discuss how we add value. Did you know that some advisors charge substantial fees for a financial plan? At FWM, financial plans are included in your fee.

Many non-brokerage financial institutions use A class funds, which bundle their management fees and product costs together. The fee is included in the fund’s daily pricing, which does not provide transparency. As a result, some investors are led to believe that there are no management fees.

The MER can vary greatly, depending the type of product that you are invested in. Don’t be afraid to ask about the MER and always read the prospectus to make sure that you understand the fee.

Having said all of that, selecting a product or advisor based on the lowest fee is not always the best option. Like anything in life, sometimes it is more prudent to pay more for better performance, better service, and most importantly, better advice. Bad investment decisions can be far more costly than fees.

If you are interested in finding out more about fees, we recommend a few articles from MoneySense:

Opinion: Simple steps would help investors make more informed decisions

How much should you pay in investment fees?

Thank you for entrusting the Frost Wealth Management Team with your hard-earned savings. We appreciate the confidence that you have shown in us and are grateful to our clients for referring family and friends.

We work hard every day to earn your trust and look forward working with you in 2021.

Recently, I attended the iA Securities Advisor Summit in Quebec City.

While there were many fascinating topics and speakers, I would like to share highlights from Clement Gignac's presentation. Clement is Senior Vice-President and Chief Economist at our parent company iA Financial Group.

Summarized from Clement Gignac’s presentation on September 23, 2019 at the iAS Advisor Summit:

• We are currently experiencing the longest bull market in history, but bull markets do not die of old age
• The service sector is resilient however, the manufacturing sector is slowing down
• ISM Manufacturing Index is at 50, signalling a slowdown, which is confirmed by a CEO survey indicating that 60-70% expect a slowdown
• GDP expected to end at 2.9%, down from 3.6% in 2018
• Policy mistakes or external market shocks could jeopardize business cycle
• Financial markets are very sensitive to trade settlements developing in USA
• Global trade contraction outside of recession is a first, due to the rise in protectionism
• Analysts are not calling a recession yet, however, if USA imposes additional tariffs in December, this will have a significant impact
• Historically, a US president has never been re-elected in a recession. The emphasis will be on President Trump to get changes enacted before additional tariffs are enacted in mid-December
• The labour market is posting its best results in 16 years
• Canada has the highest immigration growth of the OECD countries and the highest level of education with 65% of immigrants aged 25-45 having post-secondary education
• Fair value of the Canadian dollar is closer to 80 cents
• Bond yields are very low. Global bond yields have hit a record low. There are now 14 trillion bonds in the world with negative interest rates—this means that citizens are financing government funds to borrow from them

International perspectives—bottom line

Risk factors:

• The trade relationship between China and the US remains tense and brings significant uncertainty to global supply chains
• The weakness of manufacturing activity could lead to larger global economic downturn, especially in Europe with Germany
• Geopolitical risks remain high (tensions in the middle east)
• Political uncertainty around Brexit

Positive elements:

• The US consumer remains confident and has an adequate level of savings
• China is using its fiscal policy in a recession scenario
• Germany is open to using its fiscal policy in a recession scenario
• Many central banks are now pointing to further monetary easing

This information has been prepared by Greg Frost who is an Investment Advisor for HollisWealth®. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

2018 Review

Investors are having a hard time adjusting to central bank tightening, trade war rhetoric, and a global growth slowdown. This has led to sharp valuation compression. Almost 90% of all global asset classes have generated negative returns, the highest proportion recorded in over a century. Meanwhile, cash is outperforming global equities and bonds for the first time since 1994. So, it seems fair to say that 2018 has been a tough year.

2019 Outlook

If excessive monetary tightening, escalating trade wars and a growth slump form the basis for worry, then the investment outlook for 2019 is beginning to brighten:

§ U.S. monetary authorities have signaled that they will slow their pace of tightening, while other major central banks push out the date for when they might start their respective tightening cycles;

§ The Sino-U.S. trade war appears to be de-escalating, the USMCA has been signed and the largest bilateral trade deal in history, between the EU and Japan, goes into effect March 2019;

§ A global recession seems unlikely over the next year. Ongoing growth will be aided, in large part, by the world’s two largest economies - U.S. and China.

The Big Picture

A look back at 2018 and outlook for 2019

Clement Gignac, Senior VP, Chief Economist

iA Financial Group

According to Deutsche Bank, close to 90% of combined bonds, equities and commodities indices are posting a negative YTD return. A first since 1901...

Read the full article

2018 has been a year of growth and change at Frost Wealth Management.

We are so excited about how far we have come-- and even more excited about what's still to come. 

With HollisWealth joining the Industrial Alliance Securities Inc. family came many changes-- many of them behind-the-scenes. Now that we have all the building blocks in place, we are looking forward to delivering exceptional service and improving the client experience.

We value your input and welcome your suggestions to help us achieve of goal of best-in class. Let us know how we can make your interaction with reports, technology or staff better and we will strive to improve.