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Salary or commission: The disclosure must be the same

“We don’t want, if we have advisers who are paid a salary, for the client to say to themselves, ‘Ah, there’s no commission being paid to these people,'” he said. He indicated Pierre Vincent Senior Vice – President, Distribution and Product Development, at iA Financial Group.

“It needs clarity. We need to be sure we’re comparing apples to apples. Regardless of the distribution method, it needs to be the same disclosed fees and it needs to be transparent to the consumer,” added Phil Marsillo, president and CEO of IDC Worldsource Insurance Network Inc. he doesn’t care who the advisor is, he makes a sale and ultimately the customer pays for it.

For the mutual fund industry, the client will receive an annual report detailing the total amount of fund expenses and the total amount of all direct mutual fund expenses (eg, short-term trading fees or redemption fees), according to the Canadian Securities Administrators (CSA) joint consultation notice and Canadian Council of Insurance Regulators (CCIR). The fund’s expenses will be calculated based on the fund’s expense ratio, which is the sum of the management expense ratio (MER) and the trading expense ratio (TER).

According to the announcement, holders of a segregated fund contract will receive a report each year showing the total amount of fund expenses, the total cost of insurance benefits under the contract and the total amount of all other expenses title for the segregated fund contract.

The issue is that according to the disclosure currently stipulated in securities, customers already receive an annual statement indicating the amount paid in distribution fees. Adding a second report showing the total cost of the fund, which may include the commission paid to the distribution network, may raise questions.

“There shouldn’t be any confusion. If the manufacturer pays a commission to the distributor, (we want to avoid) the consumer saying, ‘Oh, it’s the sum of the two that’s being paid? How does it work?”There must be clarity to prevent the consumer from thinking that he is paying twice for things”, explained Pierre Vincent.

The elements raised constitute “good points”, Éric Jacob, superintendent of customer assistance and distribution supervision, at the Autorité des marchés financiers (AMF), stated during the panel. He clarified that the draft regulations “aim to ensure a uniform approach to the publication of these integrated fees under the two regulatory regimes with a view to harmonisation, while taking into account the differences between the products, their distribution and regulatory framework, which will allow consumers to compare costs between segregated funds and mutual funds.”

“We wanted to make sure we had the most optimal harmonization possible, to compare apples to apples. We have the same goal of seeking clarity,” he added.

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