Canadian Money Forum banner

1 - 20 of 45 Posts

·
Registered
Joined
·
12 Posts
Discussion Starter #1
Just reading a Morningstar report - page 22 quote:

"Canada fails for Fees and Expenses. Among the 22 countries in this survey, Canada has the highest annual expense ratios for equity funds, the third highest for bond funds, and tied for the highest for money-market funds. These costs cannot be explained by pointing to unique features of the Canadian fund market."

Any theories on why Canadian expense ratios are so high?
 

·
Registered
Joined
·
1,146 Posts

·
Registered
Joined
·
10,218 Posts
Why are the MERs so high?
Because we seem to be willing to pay for them.

Canadians sheepishly listen to their bank/investment adviser, who place their retirement savings into high fee MER funds. We aren't educating ourselves or voting with our feet.
That's true. I remember Anrew Hallam gave exact numbers in his latest book. And look at those ridiculous Seg funds with huge MER and bunch of different fees!!! They playing fear and Canadians buying it... for what? stupid promise to return 75% after 10 years holding?! If it's gonna happen, Canada will just print money and inflation will eat all those 75%. Those Seg funds guys making huge money and constantly paying for new developments to screw investors more and more. and Canadians continue to buy!
Another reason for such higher MER - huge number of immigrant coming every year who just doesn't know all options available. When we came to Canada in 1999 and went to TD to open RESP and RRSP (we didn't have such plans in previous country), "advisor" gave us 100 questions questioner that took us a couple of hours to finish, and then "advisor" said simply: "with your risk tolerance you have to invest into TD agressive portfolio"! That's it. And we had no idea that I can select different funds or open discount brokerage account...

Assets under Management:
Mutual Funds $773 billion (94%)
Exchange-traded Funds (ETF) $49 billion (a mere 6%)
Where those numbers from? Just was wondering about trend , if ETF AUM increasing?
 

·
Registered
Joined
·
10,218 Posts
btw, Canadian discount brokerages screwing us also with ETF :upset:
I read in one thread on seekingalpha.com that in USA TD Ameritrade allow to trade about 100 ETF without trading fees... Why here in TDW I should pay at least $9.99 for EVERY ETF transaction? :upset:

P.S> Home page of TD Ameritrade: "Diversify your portfolio with
over 100+ commission-free ETFs"
 

·
Banned
Joined
·
3,250 Posts
In their defence, I was one of those idiots. Finally one of our new years resolutions was to figure out our finances (we were one of those goofy couples that had all of our cash sitting in high interest savings accounts - for no other reason than we didn't want to deal with it). I sat down and read the couchpotato money sense magazine and felt a big <DOH!>. I couldn't believe i was letting myself get ripped off all these years. Funny, because I'll spend 1/2 a day to save $10 on something online but then I buy big MER mutual funds? WTF?

Anyway, we've consolodated at TDW and are putting together out couch potato. A bit scary, I just bought $35K worth of ZCN. Yikes.
 

·
Registered
Joined
·
12,750 Posts
I just did norbert for the first time. Can't believe I hadn't done it earlier. Although, questrade used to have a much smaller spread on forex--recently expanding it to 2% made norbert more worthwhile. I converted about $12k from CAD to USD using DLR, and it cost me about 36 bps vs the noon exchange rate on the day I converted (per Bank of Canada) or $43.25. Much better than 2%... I probably could have done it cheaper through an interlisted bank stock, but I didn't want to take the risk/wanted to test drive DLR.
 

·
Registered
Joined
·
10,623 Posts
I suspect it's a bit that there's regulations making it more difficult to open up at US style prices (Remember the discount broker that claimed a $6 commission years ago, where they never delivered?).

But mostly I think it's the lack of demand from the consumer.


Cheers
 

·
Registered
Joined
·
5,501 Posts
I used to pay over 2% MERs on my mutual funds. Now? I think the most I pay for any one ETF is about 0.33% MER. Everything else is lower than that. I wish I invested this way in my 20s. Oh well, live and learn.
 

·
Banned
Joined
·
3,250 Posts
I used to pay over 2% MERs on my mutual funds. Now? I think the most I pay for any one ETF is about 0.33% MER. Everything else is lower than that. I wish I invested this way in my 20s. Oh well, live and learn.
I know right? I can't believe I had all that cash sitting there making northing for the last 3 years. I could have made a killing. Oh well, forever forward.

Funny about Norberts - I feel the same way about that as I did about trading for the first time. (still haven't done Norbert yet) - but I plan to.
 

·
Registered
Joined
·
5,223 Posts
blame it on march 9, 2009

we didn't tank long enough for people to start realizing they need to watch their expenses to maximize their returns
in a rising market most people are too lazy or just don't care enough about the fees

let the market go sideways for about 10 years and we will see a lot more people complaining about fees
 

·
Registered
Joined
·
5,501 Posts
You might have a point fatcat. More transparency might help as well.

Something like credit card companies were forced to do through legislation; express how long it would take to pay off the debt if you only paid the minimum. For any investment products, how much money you pay in fees over 5, 10, 15, 20, etc. years.
 

·
Registered
Joined
·
10,218 Posts
You might have a point fatcat. More transparency might help as well.

Something like credit card companies were forced to do through legislation; express how long it would take to pay off the debt if you only paid the minimum. For any investment products, how much money you pay in fees over 5, 10, 15, 20, etc. years.
apparently MF and especially Seg funds companies are our clients, and I'm so freaking surprised how they trick people into their product, they paying for development after development and all developments are to charge more and more from clients (usually hidden charges). I just don't understand why those companies are not obligated by the government to declare in every annual statement how much they charge from clients money in MER, trailer fees, advisory fees, load fees etc... I think the current system is very good for everyone, except regular people getting robbed, but who cares about them?!
 

·
Registered
Joined
·
10,623 Posts
I used to pay over 2% MERs on my mutual funds.

Now? I think the most I pay for any one ETF is about 0.33% MER. Everything else is lower than that. I wish I invested this way in my 20s. Oh well, live and learn.
That's where when I cashed in my RRSP MFs, I had done better than I thought. When I went self-directed, I sold most of the MFs (i.e. 2% MER variety). When I later cleaned the last ones, I noticed it was the index MFs with a 0.8% MER. Not as good as now but better than I started with. :biggrin:


Cheers
 

·
Registered
Joined
·
12 Posts
Discussion Starter #17
I noticed it was the index MFs with a 0.8% MER. Not as good as now but better than I started with.
That's the intermediate step I'm at right now - I dropped the 2.3% MER RBC Balanced Fund and switched to 5 RBC funds representing the same diversity, but at an average MER of 0.8%. Now I just need to figure out how to properly invest in ETFs with regular, bi-weekly deposits to get that average down to 0.4% or 0.3%.

Sounds like Canada's extraordinarily high MERs are simply due to lack of knowledge on the part of consumers like me :). Our complacency can be a strength (we don't kill each other as often as citizens of some other countries), but it can also be a weakness. Maybe that's why we have some of the worst wireless rates, too.

Not sure what can we do to get MERs lowered. Do we just need enough people to dump mutual funds for ETFs, so that mutual-fund providers have to lower their MERs to compete?
 

·
Registered
Joined
·
10,218 Posts
FYI, I sent email to TWD saying: "I just checked TD Ameritrade website and on home page found: “Diversify your portfolio with
over 100+ commission-free ETFs”. I was wondering if TD Waterhouse offers commission-free ETFs? If not, can I transfer all my portfolio from TDW to TD Ameritrade?


Answer from TDW: "Thank you for contacting TD Waterhouse with regards to these commission expenses. We can definitely discuss this with you further.

While we are aware of this offer, we are unable to advise of how soon we may find a suitable partnership with a fund company and offer a similar commission structure. Also note that TD Ameritrade in the US can only service US clients, while TD Waterhouse Canada can only service Canadian clients. Due to these regulations, you unfortunately would not be able to transfer your portfolio from TDW to TD Ameritrade.


Typical Canadian BS :)
 

·
Registered
Joined
·
1,146 Posts
To be clear, there are 'some' mutual funds with low MERs, that individual investors have been smart to discover.
I’m thinking here of TD Waterhouse’s excellent TD e-Series Funds.
These low cost index funds are great for investors, with smaller portfolios, who are just starting out.

But, these are the exceptions. In general, those mutual funds that are recommended by your bank/adviser are of the high-fee variety.
 
1 - 20 of 45 Posts
Top