The debate over how mutual fund fees in Canada are the highest in the world is being launched once again with the revised publication of a draft report originally released last year. The report says that Canadians pay the highest fund fees in all categories and predictably, the fund industry is disputing the claims. It seems to me that whether fund fees in Canada are the highest in the world or not is a largely academic question. The more relevant question is how can Canadian investors earn reasonable returns when they are shelling out anywhere between 2.5% to 3% in fees? If future returns are going to very modest (in the 5% to 8% range), paying almost half your returns in fees will be the difference between a comfortable retirement and simply scraping by.
Sadly, as Ellen Roseman points out in her column in The Toronto Star, unless Canadians vote with their wallets by opting to invest in low-fee funds, the industry will never change:
I doubt anything will change until investors realize what they’re paying for advice – and what they’re getting in return.
With the current system, advisers are paid handsomely to sell mutual funds. They have no incentive to mention – let alone recommend – low-cost strategies such as indexing or buying stocks directly.
The Wealthy Boomer’s blog post
Rob Carrick’s column in The Globe and Mail.
James Daw’s column in The Toronto Star.
The original study. The industry’s lame response.