For new or small investors, mutual funds provide a wonderful way to enter the bond and equity markets and go beyond GICs.  They offer professional management and diversification that is very hard to obtain as a small investor.

However, mutual funds come with a significant, hard to see fee structure, which has a direct impact on the ability of an investors’ portfolio to grow.  In addition, a high percentage of mutual funds are sold by commissioned advisors, many for whom the key word is commission, NOT advisors.  This unfortunately often includes the banks, who are also product driven distributors.

Everyday, more questions are being asked about the high cost of mutual funds and/or the advisory system in Canada. It is too often true, that investors are paying too much for too little. They are supporting their mutual funds’ company’s efforts to find new clients, not just manage the existing ones. Their advisors are being paid to find new products and services that can be sold to them, whether they need them or not. Worse yet, advisors are being paid for providing ongoing service that is often lacking or non-existent.  To be fair, the problem is not always only the advisor, but the timid investor, who is afraid to ask to get what they are paying for.  They should demand a good, complete financial plan from their advisor or financial planner.  They should expect it and ask for it.  That is what the high MERs are for.

At Efficient Wealth we do not want your investments chosen on the basis of which fund offers the highest commission or trailer fees payable to your advisor.  For many investors, lower cost Mutual Funds, Exchange Traded Funds and Index Funds, will provide a fabulous way to achieve broad diversification and professional selection and management of securities and still control costs.  Non-commissioned advisors are in a position to be less biased.

Many mutual fund investors have grown their respective portfolios to $500,000 or more and the usefulness of mutual funds has been outgrown. It is now time to migrate from these expensive, underperforming mutual funds, to more cost effective alternative products, such as Exchange Traded Funds and Index Funds.

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