IFIC study reveals shift towards fee-based advice

By Andrew Rickard | March 01 2016 10:31AM

A research project conducted by Investor Economics (IE) on behalf of The Investment Funds Institute of Canada (IFIC) reveals that advisors are moving away from transaction-based compensation and towards fee-based models.

The IE study, which was released last week, is a wide-ranging analysis of the Canadian mutual fund industry. The 83-page report considers the influences behind sales and redemptions, how investors and advisors choose specific funds, and the role that compensation plays.

In terms of advisor compensation, IE's research shows that 35% of full-service brokerage assets are now in fee-based programs, up from 19% seven years earlier. In the financial advisor channel (i.e., among predominantly mutual-fund licensed sales people), the report notes that the transition to fee-based compensation has been slower; funds in this network are largely held in non-discretionary fee-based programs and only accounted for 3.3% of total assets at the end of December 2014.  However, by December 2024, IE forecasts that fee-based programs will hold 28% of assets in the financial advisor channel.

"With changes potentially coming in ETF operational barriers, it will be interesting to see what will emerge on the unbundled fee-based stage," reads the report.

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