New numbers are quantifying the kind of chop to mutual fund sales advisors may experience post-CRM2 implementation.
New numbers are quantifying the kind of chop to mutual fund sales advisors may experience post-CRM2 implementation.
That new information from the Australian Stock Exchange paints a very vibrant ETF scene down under that’s flourished under the increased regulation and reform instituted by the government there. While it doesn't specifically track the decline of mutual fund sales, analysts rightly point out that any increase in ETF sales has generally come at the expense of higher-MER
mutual funds.
The phenomenon has Canadian advisors looking at the Australian story as writing on the wall for their move through the same sort of reform process as their counterparts down under did a couple of years earlier..
“In Australia, a new regulatory mandate called the Future of Financial Advice (FOFA) highlighted investment fees and led to investors moving toward lower cost products. After the implementation of FOFA, the use of ETFs almost doubled, according to June, 2014, data provided by the Australia Stock Exchange. Over an 18-month span assets rose to $11.9-billion (Canadian) from $6.54-billion.”
Undoubtedly, say analysts, costs will become paramount for Canadian retail investors who up until now have proven relatively impervious to high fees whether we’re talking investments or cell phones. We’re really just a bunch of softies.
The elephant in the room, of course, are those exchange-traded funds. WP's Top 10 ETF Trends in 2015, which ran in mid-January, suggested that the competition in the ETF space would heat up in the coming year putting intense pressure on product manufacturers with inferior products.
No, we’re not talking about Vanguard or iShares.
As part of this increased competition a number of ETFs are expected to perish due to a lack of critical mass. If an ETF doesn’t have at least $10 million in assets under management after a couple of years it’s safe to assume it won’t be around by year three or four.
#pb#
“In Australia, a new regulatory mandate called the Future of Financial Advice (FOFA) highlighted investment fees and led to investors moving toward lower cost products. After the implementation of FOFA, the use of ETFs almost doubled, according to June, 2014, data provided by the Australia Stock Exchange. Over an 18-month span assets rose to $11.9-billion (Canadian) from $6.54-billion.”
Worldwide, PwC did a survey in 2014 that suggests ETF assets under management could hit $5 trillion by 2020, just five years from now. Something has to give as there’s only so much wealth to go around.
Clearly, CRM2 implementation in July 2016 will lay bare the underbelly of the mutual fund industry, which for too long has dined at the expense of Canadian consumers.
While it’s possible that mutual fund companies will take evasive action to avoid a blood bath of AUM attrition, Australia’s experience indicates that’s not likely to happen; at least not to the degree that is necessary to stem the tide.
If you don’t believe ETFs are the real deal, you need look no farther than Raymond James’ recent announcement that it was acquiring Cougar Global Investments, a Toronto-based company that provides ETF portfolios to high net-worth investors. No longer can advisors live by mutual funds alone.
As Malcolm Gladwell would say, we’re at a tipping point.
That new information from the Australian Stock Exchange paints a very vibrant ETF scene down under that’s flourished under the increased regulation and reform instituted by the government there. While it doesn't specifically track the decline of mutual fund sales, analysts rightly point out that any increase in ETF sales has generally come at the expense of higher-MER
mutual funds.
The phenomenon has Canadian advisors looking at the Australian story as writing on the wall for their move through the same sort of reform process as their counterparts down under did a couple of years earlier..
“In Australia, a new regulatory mandate called the Future of Financial Advice (FOFA) highlighted investment fees and led to investors moving toward lower cost products. After the implementation of FOFA, the use of ETFs almost doubled, according to June, 2014, data provided by the Australia Stock Exchange. Over an 18-month span assets rose to $11.9-billion (Canadian) from $6.54-billion.”
Undoubtedly, say analysts, costs will become paramount for Canadian retail investors who up until now have proven relatively impervious to high fees whether we’re talking investments or cell phones. We’re really just a bunch of softies.
The elephant in the room, of course, are those exchange-traded funds. WP's Top 10 ETF Trends in 2015, which ran in mid-January, suggested that the competition in the ETF space would heat up in the coming year putting intense pressure on product manufacturers with inferior products.
No, we’re not talking about Vanguard or iShares.
As part of this increased competition a number of ETFs are expected to perish due to a lack of critical mass. If an ETF doesn’t have at least $10 million in assets under management after a couple of years it’s safe to assume it won’t be around by year three or four.
#pb#
“In Australia, a new regulatory mandate called the Future of Financial Advice (FOFA) highlighted investment fees and led to investors moving toward lower cost products. After the implementation of FOFA, the use of ETFs almost doubled, according to June, 2014, data provided by the Australia Stock Exchange. Over an 18-month span assets rose to $11.9-billion (Canadian) from $6.54-billion.”
Worldwide, PwC did a survey in 2014 that suggests ETF assets under management could hit $5 trillion by 2020, just five years from now. Something has to give as there’s only so much wealth to go around.
Clearly, CRM2 implementation in July 2016 will lay bare the underbelly of the mutual fund industry, which for too long has dined at the expense of Canadian consumers.
While it’s possible that mutual fund companies will take evasive action to avoid a blood bath of AUM attrition, Australia’s experience indicates that’s not likely to happen; at least not to the degree that is necessary to stem the tide.
If you don’t believe ETFs are the real deal, you need look no farther than Raymond James’ recent announcement that it was acquiring Cougar Global Investments, a Toronto-based company that provides ETF portfolios to high net-worth investors. No longer can advisors live by mutual funds alone.
As Malcolm Gladwell would say, we’re at a tipping point.
