Be careful what you wish for -- any prohibition on DSCs would certainly include a ban on two more-likeable product choices.
More and more advisors are convinced any move by the CSA to ban DSCs would include blocking two other commission-based options the industry would like to hold onto.
“The discussion shouldn't be pro-this or anti-that,” suggests a WP reader speaking on condition of anonymity, but echoing the comments of other advisors attempting to read the tealeaves. “The CSA may put a halt to DSC, LL and FE all in one fell swoop so that will be [the] end of all of these arguments/discussions!”
In this advisor’s opinion, one who restricts himself to 0% front-end load funds, the DSC isn’t the dangerous beast that some portray it to be. Revisionist history puts the much maligned fee structure in a bad light, he argues, when the truth is far less deadly.
Still, more and more “younger advisors” have lost sight of the role of DSCs in mitigating client sell-offs in the 2008/9 recession, he argues. But regulators ready to eliminate those investments are just as likely to cut out the LL and FE options for advisors and their clients in the name of consumer protection. That collective ban would permanently upset the apple carts of embedded commission advisors. It would effectively force the AUM fee model onto most embedded holdouts and limit client choice.
That could have a punishing effect on clients with greater liquidity in hand -- whether you’re talking about 1% or AUM or an overreliance on ETFs.
“I freely concede that the ETF is the greatest marketing innovation of the 21st century. But is the ETF a great innovation that serves investors? I strongly doubt it.,” industry veteran Jack Bogle told the Financial Times recently.
“For better or for worse, ETFs have opened indexing to a new market of stock traders. The only sure winners are the brokers and dealers of Wall Street.”
“The discussion shouldn't be pro-this or anti-that,” suggests a WP reader speaking on condition of anonymity, but echoing the comments of other advisors attempting to read the tealeaves. “The CSA may put a halt to DSC, LL and FE all in one fell swoop so that will be [the] end of all of these arguments/discussions!”
In this advisor’s opinion, one who restricts himself to 0% front-end load funds, the DSC isn’t the dangerous beast that some portray it to be. Revisionist history puts the much maligned fee structure in a bad light, he argues, when the truth is far less deadly.
Still, more and more “younger advisors” have lost sight of the role of DSCs in mitigating client sell-offs in the 2008/9 recession, he argues. But regulators ready to eliminate those investments are just as likely to cut out the LL and FE options for advisors and their clients in the name of consumer protection. That collective ban would permanently upset the apple carts of embedded commission advisors. It would effectively force the AUM fee model onto most embedded holdouts and limit client choice.
That could have a punishing effect on clients with greater liquidity in hand -- whether you’re talking about 1% or AUM or an overreliance on ETFs.
“I freely concede that the ETF is the greatest marketing innovation of the 21st century. But is the ETF a great innovation that serves investors? I strongly doubt it.,” industry veteran Jack Bogle told the Financial Times recently.
“For better or for worse, ETFs have opened indexing to a new market of stock traders. The only sure winners are the brokers and dealers of Wall Street.”
