Fees

The Canadian Securities Administrators (CSA) has announced further investigation into the payment of mutual fund trailer fees. These same trailer fees that are built in to mutual fund MER's in Canada (likely the country with the highest mutual fund fees in the world) are banned in the UK and Australia (and for good reason: the enormous conflict of interest). 

So ask yourself, why has it taken so long for this to come about here?

Who has the most to lose?

Who controls the mutual fund industry?

But like any fee that you pay, for any service that you get, you have to ask the simple question: 

What am  I  (are we) getting for the fees that I am (we are) paying?

1) Qualitative: Service

• Planning: a very specific, personal and dynamic approach to your goals and objectives
• Strategy: portfolio management and asset allocation built to acheive your objectives
• Regular re-balancing: to ensure that your allocations remain in-line with your strategy
• Communication: weekly updates, quarterly reports, semi-annual reviews, access to the manager(s)
• Monitoring: measuring progress against your targets
• Updating: making the necessary adjustments to your strategy for any changes in your circumstances (or global economic challenges)
• Ongoing and prompt administrative assistance

2) Quantitative: Alpha (Return above the benchmark)

• Beta is the return that you achieve that matches the benchmark
• If you own a series of index ETF's, then they are the benchmark (beta)
• the real value of portfolio management is the return provided above and beyond the benchmark (alpha)

Each week on our weekly webinar we provide a look at the combined benchmark (ACWI/XBB) for a 60/40 and 40/60 portfolio for comparison purposes:

If you have similar balanced portfolio combinations, then this may help you to determine a relative comparison for over the same period of time (don't forget to adjust for fees and MER's) and this can help to detrmine alpha for you.

Alpha = Your return (after fees) - (BM- fees&MER)

If your 1 year performance is 2% after fees, 

Your Alpha = 2% - (-1.52%)

= 3.52%

(remeber that these numbers can/will change on a daily basis so the comparison dates need to be exact for accuracy)

So if you are getting good Aplha and good service, that is the best of both worlds.

If one or both of the components is lacking, you need to ask the question.

What am I (are we) paying for?

Feedback, questions, ideas...

scott@highrockcapital.ca

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bianca@highrockcapital.ca