The Canadian Securities Administrators (CSA) have published an independent research report entitled A Dissection of Mutual Fund Fees, Flows and Performance, written by professor Douglas Cumming and coauthors Sofia Johan and Yelin Zhang from the Schulich School of Business at York University. The research was commissioned by the CSA in order to evaluate whether commissions and trailer fees have an influence over the sale of mutual funds.

In his study, Professor Cumming notes in particular that mutual funds with higher returns tend to attract more investors. But the research also shows that the influence of past performance on fund sales is considerably lower when fund manufacturers pay sales and trailing commissions.

Furthermore, the study revealed that if past performance exerts any influence on the sale of securities, the future performance of the fund also decreases. Past performance has little or no effect on the sale of funds that are distributed by advisors who are affiliated with the manufacturer, and the study says this also has a negative effect on future fund performance.

Finally, Douglas Cumming’s research demonstrates that sales made through fee-based purchase options are highly influenced by past performance, and this has a positive effect on future fund performance.

To conduct this research, Professor Cumming relied on detailed fund data that was obtained directly from manufacturers of publicly offered mutual funds in Canada. Of the 113 fund companies that were contacted as part of the study and voluntarily reported data, 43 collectively manage approximately 67% of mutual fund assets and 51.5% of the fund of funds assets in Canada at the end of 2014 .

The CSA say they intend to communicate a policy direction on mutual fund fees sometime before June, 2016.

Reacting to the report, Greg Pollock, president and CEO of Advocis, The Financial Advisors Association of Canada, stated that “any decisions in regard to product sales or offerings in the marketplace must ensure that advice is broadened, not restricted.”

Pollock adds that it appears the report does not consider the monetary value of the financial advice provided to clients. “Our anecdotal evidence tells us that Canadians are generally satisfied with the current commission system for mutual funds. There’s a cost associated with advice regardless of how it is paid. Not every Canadian can afford to pay an upfront fee for service, which can be several hundred dollars an hour.”