A client reached out to me for advice after her financial advisor at BMO Nesbitt Burns dumped her earlier this summer.  The advisor was looking to scale back his practice and she was one of the unfortunate investors he was “letting go”.

The client, let’s call her Jane, shared the “transition” letter with me and I found some interesting items of note.

“On a further subject of fees, you should know that BMO Nesbitt Burns has implemented a minimum household account fee of $500 per year.  If a client does not produce revenue of $500 to BMO Nesbitt Burns in the 12 month period, the firm will charge $500 less whatever revenue was generated in the client’s account for that year.”

To transfer Jane’s money to another investment firm, BMO would also charge $135 plus GST for handling the paperwork.

Related: Can you trust advice from your bank?

A quick look at her holdings didn’t exactly scream investor friendly, either.  One fund – a Canadian small cap fund offered by Sprott Asset Management – cost an obscene 3.23% per year in management fees.

With new disclosure rules coming into effect this summer, investors are getting more information to help decipher their investment statements and fees.  For example, you might see a new statement saying something along these lines:

“Higher commissions can influence representatives to recommend one investment over another. Ask about other funds and investments that may be suitable for you at a lower cost.”

While this new disclosure may be buried at the bottom of your statement, it’s a step in the right direction when it comes to advising clients of a potential conflict of interest.

More changes are on the way.  Next up is a requirement to deliver enhanced account statements – starting July 2015 – and the following year investors will receive an annual report disclosing all fees, compensation, and investment performance.

Related: Steak knives, yes. Financial advice, maybe not.

A final step to ban embedded commissions – or trailing fees – altogether has yet to be approved.  The investment industry, naturally, is vehemently opposed to a ban on commissions as it claims the decision will lead to fewer Canadians receiving financial advice.

“Removing this form of advisor compensation would not only limit consumer choice, it would also drive advisors out of the industry, making financial advice inaccessible for the average Canadian,” said Greg Pollock, President of Advocis, the financial advisors association of Canada.

The trouble is that many Canadians aren’t getting financial advice in the first place.  The investment industry is designed to put products first, not advice.  And the list of fees, from trailing commissions and deferred sales charges to now what is apparently known as a ‘minimum household account fee’ continues to grow.

We’ll see how well Mr. Pollock’s argument that “consumers prefer to pay for financial advice through fees that are part of their mutual funds” holds up once clients begin to read their statements and see, in real dollars, what they’re paying for their investments and advice.

Related: Why fee-only advice?

One solution is to unbundle advice from product sales, meaning consumers would pay for financial advice separately, in addition to the fees charged for their investments.

This would ensure that Canadians get the sound financial advice they need without the inherent conflict of interest that exists in the current commission-based model.

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