COVID-19/coronavirus update: April 27, 2020
In a recent letter to the Ontario Securities Commission (OSC), CARP pushed Ontario to adopt new rules set out by The Canadian Securities Administrators, committing to abolish deferred sales charges (DSC) on mutual funds by June 1, 2022. Every other province/territory has adopted these rules, which help protect the financial security of seniors redeeming their mutual fund investments.
This is especially timely during the COVID-19 pandemic, which is causing more seniors to consider cashing in their investments due to poor market performance.
Excerpt from the letter:
When a DSC fund is sold, the mutual fund provider pays approximately a 5% commission to the firm making the sale. This up-front commission creates a significant conflict of interest between the compensation of advisors and the interests of their clients. Moreover, DSCs are a particularly poor choice for older Canadians as they have significant redemption penalties, payable up to seven years after purchase, which deter seniors from redeeming poor performing investments, changing their asset allocations or even withdrawing funds needed for living expenses.
We note that other investor advocates, including FAIR Canada, SIPA and Kenmar Associates support a full ban on DSCs.
CARP members consistently report that they are concerned about financial security. In a September 2018 survey, an overwhelming 95% of member respondents indicated that they had serious concerns about making ends meet in retirement. Particularly in the era of COVID-19, many seniors are focused on cutting down debt, sticking to a budget, building up an emergency fund and having a liquid, low cost investment portfolio, in case there is a need for unplanned medical or other expenses.
CARP encourages the OSC to ban DSCs with immediate effect. In the absence of a total ban, the proposals reduce (not eliminate) potential harm for seniors.