Ellen Roseman

Personal finance columnist at the Toronto Star and previously the Globe and Mail. My passion is consumer advocacy and making sense of money

Sep 22, 2021
Published on: LinkedIn
1 min read

Mutual funds used to be sold in Canada with high up front commissions. Later, most non-bank dealers switched to a deferred sales charge (DSC), with no deductions up front but high fees charged to clients who cashed in or transferred elsewhere in the first seven years.

Annual trailing commissions, paid to financial salespeople by fund manufacturers, were supposed to subsidize ongoing service. But few clients knew of this arrangement and many didn't get the service they deserved.

Shamefully, it took Canadian securities regulators 20 years to outlaw this conflicted system. It may hurt young people trying to break in as financial advisors -- at first anyway -- but it's a huge step forward for fund investors.

So, let's celebrate the demise of a 20th century #innovation to compensate fund sellers and not bewail the ongoing service commissions that didn't help clients prosper.

“With the removal of DSCs (deferred sales charges), it’s extremely hard for an advisor to get out and start.”

This is an almost exclusively Canadian narrative.

Do Canadian advisors believe that there are no young advisors in the US, UK, or Australia? Or that the only ones that do exist have no option but to work for a larger established team who got there by nature of the fact their equivalent of DSC was a thing back in the day?

DSC allowed for the pervasiveness of bloated infrastructure and distribution. Other jurisdictions have figured out both distribution and billing models that get advice into the hands of consumers without a 5% upfront comp.

To claim young advisors are all doomed is looking at the future in the rearview mirror and assuming zero ability to innovate. If anything this view is an inditement of faith in our ability as professionals to actually act like entrepreneurs and evolve.

And in case anyone doubts me on this, here is a directory of over 1,000 US advisors who have done just that.


Why 'super teams' will enable young advisors to break through