Advisor.ca reports that the cost of advisor-assisted mutual funds in Canada isin line with U.S. counterparts, according to a study by consulting company Bain & Co. The study was commissioned by mutual-fund company MacKenzie Financial, which just released a summary.
The summary concluded the cost of owning a mutual fund in Canada is very comparable to the U.S.
The findings are based on adjusting fees for the following differences:
In Canada, advisor compensation and sales taxes are included in expense ratios but not in the U.S.
For front-end load funds, U.S. advisor compensation is typically through front-end sales charges and MERs of 0.25% while Canadian advisor compensation is mostly through a MER averaging 1%.
Back-end loads funds, with deferred sales charges (DFC), are much more common in Canada; for purposes of the study, it appears (from the wording in the document released by MacKenzie) holding periods were assumed to be long enough to avoid the DSC.
The summary then shows bar charts comparing the Canadian cost of ownership for front-end load funds in accounts of $0-$100K to the cost of ownership for over a dozen U.S. fund companies. Then the conclusion follows that the cost of owning a mutual fund in Canada is very comparable to the U.S.
I hope later to have a few comments. For now, I do wonder if comparisons in other formats (e.g. asset-based averages) would convey the same message. I also wonder if the term very comparable is somewhat imprecise in fact, it seems to be a relative term that could allow for a range ofresults to be described as in line.
Interesting factoids from the summary:
In Canada, 95% of front-end load funds are sold without the front load In Canada, only 8% of mutual funds are sold directly by fund companies compared to 30% in the U.S.
Hat tip to Ken Kivenko for pointing out the report