Firm’s CEO tells why its unique performance-related fee structure is a win for investors
Canada’s first publicly available performance-related funds launch tomorrow as the wealth industry’s fee evolution took an interesting twist.
Provisus Wealth Management will unveil nine actively managed platform-traded funds (PTFs) on the NEO Connect FinTech distribution platform. They will transact at the end of each day and are designed for fee-based investors who work with either discretionary or non-discretionary advisors and portfolio managers. Purchases are done the same way as ETFs or stocks.
The Provisus’ Core Funds PTFs are: Canadian Equity, US Equity, International Equity, Emerging Markets Equity, Global Real Estate and High Yield Fixed Income, while Provisus’ Fund of Funds PTFs are; North American Equity, Global Equity and Total Equity.
Management fees are 0.25% across the board but feature the company’s “Pay-for-Performance” model so when a PTF outperforms, clients pay a performance fee equal to 20% of the performance of the PTF above the specified benchmark.
Chris Ambridge, president of Provisus Wealth Management, said the company decided to put its “money where its mouth is” with the funds. The 25 basis points cover costs and he said that if the firm wants to make profits and get off a “bare bones existence”, it has to step up and produce a successful product.
The pre-set benchmarks are standard, so for example the Canadian has to outperform the TSX Total Return while the US must do better than the S&P 500 Total Return.
Ambridge told WP: “It’s an apples-to-apples comparison. It’s unique because there is nothing like this in the industry and we’ve been doing this fee methodology pretty well in our managed accounts for seven years now. This is the first time we’ve taken it to a wider audience.”
The suite of PTFs is publicly available to the IIROC community and represents a twist to the way clients pay for products. Ambridge describes PTFs as a “quasi combination of ETFs and pool funds” that allows OMs, like Provisus’s, to be available to the average investor rather than just high-net-worth individuals.
He said: “It’s a way to take lower-cost vehicles to the public market so that clients, through their brokers, can now use them.”
He added: “You pay the manufacturer based on performance – no one else is doing it – and you pay the advisor for the service they provide so their fees are separate to ours.
“There is no trailer for advisors so it has to be a fee-based account and you have to have a broker on the IIROC platform who can buy securities. The beautiful thing with the NEO is you can do bulk trading now so you can do it across multiple clients with one easy step.”
Ambridge believes the suite’s uniqueness will stand it in good stead to be a popular option for PMs and investors but he doesn’t expect a swath of copycats.
He said: “By taking it to a wider audience, I’d love to see imitators but people have a cost structure and budgeting and marketing bills, and may not be overly confident on their performance results so you are taking a chance.”
