Why are investors paying fees that eat away nearly half of their lifetime savings?
The answer is simple: there is no fiduciary standard that governs the investor-advisor relationship. This means financial advisors are often motivated to select a product that pays them the highest commission, rather than one that is in the best interest of their client.
That’s why CARP has launched its Protect My Savings campaign. CARP is calling for government action now to protect investors’ life savings from fee gouging.
Read VP of Advocacy Wanda Morris’ article, Grey Matters: Calling a bank employee an ombudsman is misleading.
What is Canada waiting for?
The United States, United Kingdom, Australia and the European Union investment industries operate under regulation to advise in their clients’ best interest, regardless of their own compensation.
Yet the debate in Canada on whether advisors’ should have a fiduciary duty continues. If fact, it’s been going on for over a decade. Despite a major consultation paper, two pan-Canadians studies, and an industry round-table on the importance of a best interest standard, governments and regulators are dragging their feet. CARP needs you to make your voice heard.
How much are Canadians losing?
Canadians have more than one trillion dollars invested in funds with high fees ranging from 1.5 – 3.5% charged by funds, brokers and banks. Yet, there are cheaper fund options with fees as low as .5% that over the long-term outperform funds with higher fees. Imagine how many retirement dollars are lost to high investment fees.
For example, an investment of $100,000 compounded at 5% with no fees would grow to $338,635.50 over 25 years, implying a return of $238,635.5. An investment of 100,000, assuming a 5% return and 1.5% fees would grow to $232,080.30 by the end of year 25, representing a dollar return of $132,080.30.
Based on these numbers the investor would see his or her return reduced by $106,554.70 or approximately 45%.
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Updated: April 19, 2017