Trailer Fees, Economies of Scale

And your definition of volume would be what size of account. ?

900K

Hassie if you have 900k in funds with one rep and they have done nothing over the last year for you or with you than why are you with that individual.

The Trailer fees AKA Service Fees are for service, if your not getting it, change reps.

Hassie,

Rather than whining why don't you liberate yourself by purchasing the noload funds that don't pay service fees. I don't need to tell you which ones they are.

If you've got $900k in mfs and they aren't in the above funds then you should be paying considerably more $1k in service fees.

$1k represents 10 percent of your annual return? You made $10k on a $900k portfolio? You need another planner. And I don't need to know your long term objectives, horizon, income needs, religious beliefs or sexual orientation to tell you that :-0)

A person doesn't accumulate 900k by being clueless. Time to move to no load low MER no trailer funds, and leave the leeches behind.

Hassie, why wine? Geeez, if I were you, I'd be kicking the walls and screaming.

A 10% return last year on $900k - hell, the cost is not the trailers but the absolute lack of performance. If I look at a portfolio with less than 20% return last year, I want to know why - the TSE did 15%, S&P did 39%, MSWI did 21%, SMU did 12% - heck you did not even achieve the SMU index. Are you sure about your return calculations?

FWIW, for $900k we would run this (potentially) as a multi-manager wrap program, total MER about 1.25% to 1.75% (ahem not even close to 3%) (including the cost of all our services) - a MF program would be more expensive but could be considered. IOW, low-MER, low-cost, no-commissions. PLUS, managed performance reflecting a comparison of the absolute performance, the relative performance and the benchmarked performance (I have one client who made 38% on the entire pool of assets we monitor for him).

Warren are you familiar with IDA and IFIC rules on soliciting business?

I trust you know if you reside in the same province as Hessie?

Hassie,

The service fees on your account would range anywhere from $2250 to $9,000. You should be getting GREAT service! And a $10K return? Like Warren said, your problems are a lot steeper than the service fees paid - you could have done better in a SAVINGS account (well, maybe not quit, but close!) - and this in a year where the markets did as well as they did!

You need to find someone else. You're obviously not happy with what/who you've got. You've got an account that's should be demanding some attention from a good planner.

Now, I wouldn't necessarily recommend Warren (just don't think that fee-only is the only answer) but there are lots of good planners here. I don't remember which province you're in, but if it's Ontario, I'd suggest giving Madelyn a shout.

I realize that i should have made myself more clear on this subject.

What i meant to say was ,I paid (tru the mer) an additional $1000 last year ,over and above the previous year because of increase in value of my portfolio.

i cannot see any reason why my fp should get a portion of that increase sice all that was done was basicly a monitoring of my account, no switching funds ,no additional purchases, just 4 quartely statements and maby 2 hrs. of his time.

the total trailerfees to my fp represent about 10% of my return last year.

my average return last year about 10.5 %

The whole idea for me to create this thread was to show that trailerfees do become an important factor as your portfolio grows, Some of u know me (i'm sure) since we went to great lenghts last winter to discuss this very subject.

therefore it would be interesting to see if these fees become "unbundled" from the mer.

I wonder what will happen to companies like mutualfund direct if these fees are shown seperate,as they are supposed to be for advice.

Warren, ,if u would only apply the trailers (that your broker is getting now) to your own fees i might consider it.(I hate to pay twice) As for no load funds , maby "new" money but I would hate to pay the cap.gains tax by switching to noload funds and especialy since alot of them are dsc. And I still think there schould be a volume discount.

thanks from Hassie

RB you said >I trust you know if you reside in the same province as Hessie? <

No I don't but I was not soliciting business as a broker or an IA, I was answering her issue with respect to poor performance and higher trailers, we have offices in most provinces and would service in the appropriate jurisdiction acordingly.

Hassie, I understand your point about trailers and the capital gains but, frankly, to grit your teeth and hang on regardless to a poor performing mix strategy or tired funds is false economy in the extreme - the opportunity cost of paying tax a bit early (what is the "turn ratio" of the current funds ??) is modest compared to the potential loss in return.

Take this test. Research the performance of Horizon since 1987 and see how holding to save the DSC or avoid paying income tax you would have had lost many dollars in performance in order to save a few pennies.

As for volume discount and trailers - indeed this is exactly what I am talking about - the multi-manager program has no trailers to anyone and the total mer is about 1.5%. Bear in mind that if you are investing in 15 or 20 funds you may be over-diversifying and likely would at best achieve index-like returns .... hardly an appropriate goal for a managed pool of assets.

As for the DSC, there ae ways around this or ways to reduce this, I always try to save the client a s much of the "hit" here as possible but sometimed the best answer for some funds is to get out and take steps to improve performance.

Rob, thanks for the comment .

Warren.

Thank u all for the friendly comments and I probably should explain a bit further.

My core holding is cundill value fund (25%) and I had a fair bid (15%) in fidel.far east.

I have asked several fp's on the sunday chat what they think of cundill, and there was a total conflicting reply,some say get out,some say stay

This fund has been lagging for several years now, I am not a frequent "switcher" based on last years performance and some swear by this fund (Reg)

This past year does not reflrct my av. return over my total inv. period (since 1981).thank god.

But the question was not poor performance but cost of trailer fees as a total cost of my portfolio.

I must confess that I am in the process of switching my acc. to an other adviser who is not biased to any product (as far as I can see)

I must say this ,this forum has helped me a lot to understand how mf's really work,not only from fp's but also from my fellow investors.

And I can also see the biase the way these funds are sold,for instance 1 fund (scudder?) introduced trailers and since they did,there funds started selling.

Now the usuall arguement is "u can't get something for free, go do it yourself" etc. Because I am complaining about these trailers deos NOT mean that I expect to work an fp for free, what I am saying is give me a break on the trailer fee,I am sure there must be a certian cost to "handle" my account but up to $9000?

There are probably sincere planners around ,like some on this forum,but they seem to be more the exeption than the rule,

Now Rob u are saying do not look at the cost only and that may be tru to some extend, but a lot of people do not seem to share your view judging by other threads on this forum. What we (I) want is a volume discount.

Thanks from Hassie.

with my third planner, and the only way to find a good one seems to be tru trial and error.

oops that last line screwed up a bit,

Good Luck with planner #3, Hassie. Is s/he a fee-for-service planner like Warren? With the stock of wealth you have amassed, I think you should be able to realise some economies of scale with a fee-for-service type. If you hire a planner whose fee is $200/hr that is 45 hrs/yr for your $9000 on trailer fees (although not all funds charge 1 percent; some are as low as 1/4 percent). But more importantly, the advice you receive will be unbiased and that is biggest benefit of a fee-for-service planner. With this approach the planner's choices are uninfluenced by his/her remuneration level. Of course commissioned planners would deny that these commissions influence their fund choices but they would say that, wouldn't they?

This doesn't deal with trailer but I would like to share the following:

Last year I bought 25K 0% FE in non RSP GT Global mutual funds. One of them was GT Global Pacific (5K). I lost ~40% when the world caught the Asain flu so I made some swithes and added another 2K to the Pacific fund and decraesed others to arrive at 8K in the Global Theme fund.

Yesterday I got a statement from GT Global showing that the GT Global Theme fund was purchased DSC. I called the FP last night (11:00 PM in New Brunswick) probably got him out of bed and told him i wasn't pleased.

He never said it was a mistake but said he would change it back to a 0% FE switch.

I want to buy some Templeton Intl, 0% FE would you go back to the guy or is this grounds for divorce or impeachment?

Hassie....you mentioned you want to buy Temp Int...is that INTERNATIONAL STOCK fund??

If it is, is that not sold on a DSC basis? I'm curious because I am buying a rather large purchase of this fund soon.

Please correct me if I have the wrong fund.

Thanks

P.

Hassie,I've got some FREE advice for you. The Febr. issue of Canadian Moneysaver on pages 21/22 has listings of top performing funds. Under canadian Bond funds,the McLean Budden Pld Fixed Inc fund has no load and a M E R of 0,00 (Exp ratio rank : 1) Average 10 year return of 11.8 %. Or how about Canadian Balanced-Sratagic Asset Allocation Bisset Retirement Fund Again no load and a M E R of only 0,44 % 9 Exp ratio rank 34 ) I bet the F P who recommend these funds don't get any trailer fees. Bissethas a 5 year av of 16.1 %

For my money I would prefer A I C with a 5 year av of 35.1 % after paying an outrageous fee of 2.56 % As long as I get an above average return on my funds ,I don't really care that my F P also gets a slice of the pie .I But if the returns are below av. or negative then I'll add my name to the list of whiners

Hassie, thanks for the comments - sure Cundill is a good fund, but is it the right fund for you and your portfolio - I don't know and could not comment without a proper discussion with you - I am sure you understand that appropriate recs can only be supplied based on proper KYC due diligence (and for RB's benefit, ensuring that inter-provincial securities rules are not transgressed).

>what I am saying is give me a break on the trailer fee,I am sure there must be a certian cost to "handle" my account but up to $9000? <

Yes, this is what I was speaking about above - many of the funds we use are privately-sold pools of managed money (the same managers who run many of the public funds and pension funds) - there are no trailer fees at all on these and the overall MER (all inclusive) is in the 1.3% to 1.5%. What I am saying is that there are no trailers to "give you a break on". The "cost" to you (included in these MER numbers) of our fee is only 0.5% on this amount of money (BTW, fully deductible, not partially deductible as are trailer fees).

>I got a statement from GT Global showing that the GT Global Theme fund was purchased DSC.<

Most brokers will correct a trade that has been made incorrectly. In fact most securites jurisdictions provide you, the investor with the right to have a correction made within a few days of the transaction. It's a good idea to check closely any slips you receive to make sure the transaction went through right.

>If it is, is that not sold on a DSC basis? I'm curious because I am buying a rather large purchase of this fund soon. <

Yes Perplexed, the fund she means is Templ. International - and yes it can easily be purchased on a FE basis and the FE commission negotiated. I see negotiated rates of between 0% and 2% or 3% depending on the advisor, the size of the transaction and the other business with the advisor.

Hassie, best of luck with your 3rd - will this be "3rd time lucky"? Hope so.

Warren.

Hassie,

The Baycom numbers that accompany the funds in your planner's periodic statement of account differentiate between load funds that are bought FE and DSC. For instance, the Baycom # for the DSC version is GTC541 while the FE version is GTC543. These baycom numbers are found in Paltrak and are a useful check on "forgetful" broker/planners. Why is it they never make this mistake the other way around, eh?

There seems to be a mixup, whoever used my name on febr.12 05.01 pm is not me,(who started this thread.)

Warren what u r saying is basicly that when an certain $ volume has been reached one should switch over to an private manager.

What happens to my existing holdings in that case, would they have to be liquidated?

I guess the only way to get my "moneysworth" out off these trailers is probably to get advice on non related investment issues.(if I don't swich to a private pooled fund)

Well thanks all sofar for your input , I like to see first what my new planner suggest.I have a meeting today.

Thanks from the real Hassie

This is to the "real Hassie":

Warren what u r saying is basicly that when an certain $ volume has been reached one should switch over to an private manager.

Correct. I did a little spread sheet entitled "MER Matters ..." and tested $10K growing at 10% (gross) for various periods and different MERs.

Starting with a "base MER" of 1.25% and moving up to 2.75%, the results are astounding. In 10 years the following are the differences in total FV (for MERs of 1.75%, 2.0%, 2.25%, 2.5% and 2.75%, respectively) 5%, 7%, 10%, 12%, and 14%. In 15 years the "MER-slippage factor" is 7%, 11%, 15%, 19%, and 23%.

To convert all this into more readable (and comprehensible) words, investing for 10 years at a MER of 1.25% will result in 10% more $$$ at the end than investing with a 2.25% MER. The improvement offered by the lower MER at 15 years would be 15% and about 20% over 20 years.

Of course this assumes that performance characteristics are similar for high MER funds and low MER funds. However, all this means is that the sooner one can move to a lower MER environment, the better it will be for the long term growth of the portfolio.

I look forward to comments by others - Gummy , is there a graph here you'd like to try?

Warren.

Graphs and spreadsheets are for wimps. Formulas are more concise. To calculate the loss associated with an MER a full percent higher after 10 yrs is straightforward,

loss = 1 - (1 - MER)¹⁰,

so in Warren's example the formula spits out

loss = 1 - (1 - 0.01)¹⁰ = 0.0956 = 9.56%

In 25 yrs that loss amounts to 1 - (0.99)²⁵ = 0.22218 = 22.218%

Hey Warren, do you have an old girfriend working at the Globe&Mail or what? I can't open this paper without seeing your name thrown about by a columnist covering some investment story. Are you your firm's public relations person? It's always you that is quoted.

Warren, what would be the threshold amount to switch to a private manager or get access to the private funds.

Regards, Ted

Bylo, thanks for the link - I'll scan the article in a minute, but first ...

Graphs and spreadsheets are for wimps. Formulas are more concise

Thanks jd, well said ... nice formulae, too.

Hey Warren, do you have an old girfriend working at the Globe&Mail or what?

Hell, no .... I deny everything. Why, what have you heard??

Are you your firm's public relations person? It's always you that is quoted.

Not really just me - there are several of us who are well-quoted by the media. I have been involved in dealing with the media for about 15 years - this establishes a lot of links to folks in the business and they like the background and experience. Plus clients like it and I don't mind the exposure either.

Warren, what would be the threshold amount to switch to a private manager or get access to the private funds.

Well Ted, generally the lower limit for our program is $500k. But I usually say between $500k and $800k is a good range. FWIW, the counsellors themselves often have much higher entry level requirements - in the range of $1m to $2m for some of the better-known ones. Of course I would be very careful of the "wrap" programs out there with the major brokerages as the total fees can range close to 3% and at that level I would "pass", thanks, and pursue low-MER no-loads and low-MER load funds. Hope this helps.

Warren.

Just my 2 cents, but I can't help thinking that advising anyone with $900k to be in mutual funds is a little ridiculous. Seems to me (MER-free!) stocks are where you should be. I believe even a top-of-the-line full-service broker would cost less than you'd be paying now.

Also, that would solve the problem of your advisor getting paid more for doing nothing, just because your total assets increase. With a fee-for-transaction broker, you only pay fees when you buy or sell. As long as you hold, your assets compound fee-free.

Thanks Scooby and Warren ,but I am not sure if I should heed your advice,

so what u are saying means then that everybody who's portfolio reaches $500k should change.

I probably should mention that I am talking about unregistered money. If I did what u recommend that would mean to liquidate(sell) my existing holdings ,and that could mean a large taxbill,

I wonder if there is a formula to calculate what way is best, = realize the gains and pay the tax and switch to a lower cost, or stay with the once that have a high unrealized gain, (and higher cost) I guess it depends on the unrealized gain portion

I now that that sooner or later I have to pay the "piper" but would it not be better if it is later?

But i also read in your commends that you don't see these trailers coming down.

There is one interesting article about fees in the Toronto star of febr.13. It says according to a survey done only 30% of people interviewed knew about fees, and only 1 third of these 30% understand fees,(I wonder if this 1 third are only the ones who visit fund libb.

Looking forward to your reply

Thanks from Hassie.

One thing I forgot to ask, would it make any differnce if I rollover my nonregistred money into a holding co.?

Would this be tax adventatious?

Thanks from Hassie.

Hassie,

At the time of a "rollover" to a holding company, your assets will be "deemed" to have been sold, and you'll pay the tax man anyway.

MOST people don't properly understand fees. Just last night I spent an hour with a prospective client going over it all. In the end, this particular client isn't concerned about the fees paid, he knows what he's getting for the $$. Knowledge is the difference. Why don't most people know/understand the fee structure? It IS complicated (heck, alot of planners don't know all of it!), and most people don't spend enough time looking at their investments and financial plan.

Should there be changes made? Yes. I'm with Mr. Krembil on this one - I'd like to see an "unbundling" of fees. I know my clients aren't concerned with what they're paying me - my income won't change. Most of my clients know the exact $$ their account pays me. (One of my "canned" comments is: "Please, if you have any questions, call me, don't feel like you're taking my time, your account is paying me x dollars a year - I owe you some time.")

Anyway, in the short term, I'd suggest that you get a planner you feel comfortable with and that is giving you your money's worth.

Hassie, pay the tax later is better, of course - but, depending on the "turn ratio" of the funds you are in (many have turnovers of 30% per year) the "cost " of early redemption can be minor when compared to long term MERs and performance shortfalls.

Rolling to a corp is possible and in many cases an estate freeze can be a useful way to transfer the "growth" in value of the portfolio to the next generation. However, this is a complex manoever and needs careful review - well beyond the scope of this discussion.

Warren.

Hassie, how did the interview with FP number 3 go?

Warren.

Hassie, I think I do agree with Scooby about changing to stocks altogether but only after the following considerations: 1) your age, if it will only be another 10-20 years of blood sucking from MF companies, then it may not be worth the effort. 2) the average cost of your MFs go up year after year, and if you redeem 7% each year ( as suggested in the Globe a couple of weeks ago ) , then you should not have much of a tax bill. 3) afterall, it is your money. Your issue has been raised in the newspaper recently and if you start a campaign, especially with Cundil, they may eventually give in. 4) do not put any more money into MFs?

Thank u all for the friendly advice.

Yes Warren ,I did go with another planner (sorry)

Rob I read your last reply were u have a meeting with a prospective client,and after u explained the fee structure the guy did'nd care less about the fees.

Well Rob maybe u schould let him/her read the latest thread "are mf's for fools" Did u explain it that way to your prospective client?

I do not really want to be sarcastic, and i do appreciate your input and advice, but as u said "knowledge" is the difference.

The mer. and trailers should be a big concern for all mf investors, as explained in the :are mf's for fools" thread even decimal points will amount to a significant difference to your bottomline (over time) Thanks from Hassie

Hassie,

Actually, I didn't have to explain that part of it to him - he had just read an article in our local paper on it.

These numbers being thrown around are REALLY misleading. They tell only a part of the story, and, to be honest, it's a little frustrating to me. Do the costs add up? Yup. The question is better asked, is it worth it??

And as for the % of return that's chewed up in the MERs, that's a function of whatever return you use!! Yes, if you use 7%, then a 2 or 3% MER is pretty significant. If you use 10% it's a little less, and if you use 12%.... you get the idea. If you're only averaging 7% and paying 3% in MERs, then you'd better be looking at other options.

I repeat, the bottom line is: it's not just the bottom line!! What are you getting for what you're paying for? If you don't like what you're getting, go elsewhere. As has been said many times before, no one is holding a gun to your head.

Hassie, with everything that we've talked about in the past, I can't believe that you would question my integrity in explaining fees. I've said time and again, I go through a VERY detailed disclosure statement (it even includes the "co-op" stuff.) with ALL of my clients. As I've said before, this isn't JUST for my clients, it's also to cover myself, an unfortunate reality of our society.

Hassie, you didn't mention how your meeting with #3 went...

Hello Rob -

I think you nailed it right on the head when you asked the multi-billion dollar question "is it worth it?". However, your frustration level may increase in the future as more and more people answer that fundamental question "NO".

The mutual fund industry provides consumers with many benefits -- but the overall cost of these benefits is too high. The industry has made the shrewd business decision to not compete on price. They compete vigoursly for market share by using virtually every marketing tool but price. They attempt to control distribution via a network of commission based FPs, they advertize aggressively, and they play-up the unsubstained myth that they have fund manager gurus who can somehow beat the market in the long-run. At the same time when MERs are brought up, they talk about economies of scale and fail to mention that MERs have gone UP in the last decade as the size of MF companies have dramatically increased.

You state that people don't have a gun to their heads. While this is true actually (at least I hope it is) is it true metaphorically? Most people don't have the time, inclination or interest to sift through the evidence. They WANT TO BELIEVE that the people who are advising them, and the MF industry generally, have their best interests at heart. While I believe that the interests of consumers and the interests of mutual funds have some overlap, it is not the primary raison d'etre for the industry -- profit is. And they have made the decision that high profit margins are not to be abandoned easily.

Investors will be better served when, as eventually will happen, a Canadian version of Vangard steps up to the plate.

BTW Rob, this posting was in no way intended to denigrate your abilities or ethics as an FP. I have no reason to believe anything other than you may be first-rate in both of these dimensions. But (and there's always a but) you are part of the industry and have a vested interest in maintaining the status quo. I would also guess that you really do believe your statements concerning the value added benefits of many mutual funds with high MERs.

Investors will be better served when, as eventually will happen, a Canadian version of Vangard steps up to the plate.

Hassie, no need to be sorry, hope you are successful and happy with your new relationship ... your posts in here are getting a lot of response, thus making you much more aware as an investor (noooooo, I am not saying you were unaware before) ..... with investing, the more you know, the better. Best of luck out there.

Bylo, I can hardly wait either .... FWIW, Vanguard as much as said to me that they feel they have made an error by not coming to Canada several years ago. A parallel up here would be the hand-wringing that PH&N went through before they opened their Toronto office.

Warren.

Re Vanguard, makes sense -- now that I've got a US account opened and bought into their funds :-)

Seriously, what can we do to roll out the welcome mat? A red carpet would be too ostentatious for them :-)

BTW, they were up here last week recruiting IT types for their US operations in PA and NC.

Rob and Warren thank u both for your reply and pk thank u for sharing my concerns.

Rob as u said we discussed this topic to great lenght (last winter) although we did not come to a satisfying conclusion , on my part any way. I do not doubt you integrity, sorry if it came over that way.

please read my reply in the no load -low mer thread.

Warren ,thank u for wishing me well with my new planner I also value your input highly (the same for Rob)

Like I said ,fee for service should be the only way to go ,Warren this makes u then unbiased (sort off) but it would be nice if u could put the trailers your broker is getting now towards your own fee. But that would make u a comm, fp. aarggg. grumble ,mutter I really wonder if the sponsers off this forum read these threads, they convieneantly stay quiet and seem to ignore this whole issue, i wonder what it will take to listen to their clients . Maybe some foreign competition will do it ,as Bylo suggested. Thanks from Hassie.

PK,

A very well-worded reply. I understand your concerns, and share many of them (as I've mentioned in other places). Of course my opinions are biased - as you said, I'm a "part of the industry." Yes, MERs in some cases are high. Here's the crux of the problem. For every "study" that show's low MERs are the way to make more money, there's a study that shows using MERs as the basis for choosing a fund is a mistake. Now, if we could have the same performance (identical funds), the one with the lower MER should perform better. Should MERs come down? Yes. Will they? Yes - and some are doing that now. (Although I had to chuckle at a recent Infinity meeting I attended where Richard Charlton was speaking. Someone in the crowd asked him about their MERs and he replied "our Management Expenses are 2%, and our total MER is in line with the industry. As we grow it will come down even more." Give me a break!! ) Anyway, I doubt that I have anything new to add to the discussion. I agree that it's an important issue, and that it would be nice to see MERs come down - and that we will see it over the next few years.

Hassie,

Thanx again for your comments. The only way that you're going to get what you're asking for is for us to have a system similar to the US - where service fees are seperate (unbundled) - and your "fee only" fp can actually be the agent of record. Of course, that will mean that their costs will go up a little as they will have to put into place a "back office" to handle all the processing. But, then you could just pay their "monitoring fee" (which is usually pretty close to the service fee) and not have to pay it twice. It's an interesting problem, isn't it. People often forget about the costs of the back-office (though I've seen Warren acknowledge this many times.)

Anyway.... Best of luck to all!

Bylo,

Maybe we could deluge Vanguard with Canadian e-mails? I know you've written to them before but they might just get sick of us and come North!

Scooby,

And I continue to do so. I even responded to their recent IT recruitment campaign with something like, "call me when you decide to set up shop in Canada."

I would like to add that I was thumbing through some year end reports, AGF being the last one and noticed in a lot a cases the same stock is common to many funds.

If a company has five funds (Cdn & US equity, bond, Intl. equity, and a balanced fund) a balanced fund must be very easy to maintain because its a basket of stocks from the individual funds.

The .40 increment charged on the Bisset Retirement (balanced) fund must reflect the true management cost of the fund plus profit. Anyone charging 2.75% - 3.0% and using stocks solely from the other funds is making a fortune. Bisset also adds MERS from the other funds to the retirement fund so the additional MER expense is 75% -100% profit.

One mans opinion!!

Bylo, right on about Vanguard - let's roll out the email mat for them. I was speaking to them a couple of years ago and then they would take funds from us Canuks. They have since stopped doing this (at least directly, IOW without the use of a US-based Waterhouse account or such-like) - I secretly think they may have made this change to protect the base of business they might have coming into Canada (SEC/OSC regs might also have had an effect, or even the cost of International postage, knowing them ).

Anyway, I may be at the NAPFA Conference this year and would make a point of having a detailed discussion with them and trying to get the scoop on their intentions or at very least, get Bogle's email address.

Thanks for your kind comments about our clients - we may be large in the fee-only business in Canada, but how we would compare to an organization that is almost $300B (USD !!) is a bit hard to figure .

Hassie, good to hear about your new relationship - yes as far as taking trailers, you're right we have thought about it (you bet) but we all feel that this would compromise our fee-only status: example, how would I counsel a client on PHN vs a trailered fund, even if the trailer is offset against the fee charged, is then the client not biased in favor of the trailer fund? OTOH, what will be happening is that several fund cos are making available "institutional" versions of their funds where trailers are not paid and we can charge the monitoring fee consistently, regardless of whether a fund is institutional or no-load. Yep, it's getting interesting out there.

Remember also there is a tax advantage in investment mgmt fees compared to trailers - the monitoring/advisory fee is completely tax deductible (assuming a non-RRSP account) against all sources of income, while the trailer is only partially deductible in that it at least partially offsets dividend income or capital gains (depending on the fund assets and cash flow, of course).

Warren.

Warren that is an interesting scenario about "institutional" versions of funds, If all Mutual fund co's. would offer this then the favor from 1 fund over another would be eliminated.

When u read all these threads about mers and all related newspaper articles there seems to be a growing resentment as how this industry operates.

I think the fee only approach (like your firm) will be the best approach.

Only then can I (we) judge if we receive value for our money and if there is value added for the amount we pay,and we can then decide for ourselves the level of service we want or require ,instead of being determent by the trailers we pay now.

the tax advantage is also an added benefit.

I for one have not expierenced this added value from my 2 previous planners, and I really hope my new fp will work out. only time will tell.

Thanks from Hassie.

Thanks from Hassie

Vanguard Message Number AVGI-3RZPN5

Thank you for your recent suggestion concerning establishing a Vanguard presence in Canada. Currently, there are no plans to open a Vanguard office outside the U.S.. However, your idea has been forwarded to the appropriate department. We truly appreciate your recommendation.

Please feel free to post any other suggestions for our consideration. Suggestions for improvement are being continually reviewed.

Richard L Morgan Communication Associate The Vanguard Group

jd, Thanks for the post of the message from Vanguard - we'll just keep at 'em, eh?

Warren.