On the trail of trailer fees

Re.: “In Praise of Trailer Fees,” Brendan Caldwell, June 19.

I believe Brendan Caldwell is right. I witnessed this exact event almost a year ago, when the regulators in London, england, broke apart the existing compensation model. Prophetically their actions created the same bad case scenario that Mr. Caldwell is warning will happen here; the small investor got shafted.

As Mr. Caldwell noted, the changes freed the large investor from subsidizing the small investor. So the end result was an enormous decimation in the ranks of brokers with those still remaining fighting for only the wealthy clients.

In fact the small investors are now basically on their own without professional advice. As the regulators are patting themselves on their backs, this recipe for disaster will decimate retirement funds and likely throw many more onto welfare rolls when older. At the same time, those bureaucrats will retire just fine with their government pensions.

Why did this happen there and why is it happening here?

due to credit collapses, the stock market collapses, bank collapses, sovereign defaults and the exposure of so many frauds, the demand for regulation grew. Regulators’ roles were enlarged and empowered with the unfortunate premise that the entire advisor industry is corrupt. So the english bureaucrats in their Ivy Tower deemed their rules as fairer and did not listen to the valid warnings of those in the industry since brokers have a selfinterest. They failed to understand that the brokers were trying to keep their industry valid to as many investors as possible. So in fact the small investors got shafted by those trying to protect them.

Mr. Caldwell’s one mistake was to say that “80% to 90% of Canadians who buy mutual funds will buy their next one through an advisor.” Over half of those Canadians will find that quality advisors won’t even be there! Rick Clarfield Toronto

Re: “In Praise of Trailer Fees,” Brendan Caldwell, June 19.

While Mr. Caldwell does an effective job highlighting how trailer fees work to align the interests of the advisor with that of his or her investor, he ignores the agency costs associated with the selection of funds.

Advisors will be incentivized to put their clients’ money in the fund that pays the most lucrative trailer fee and not necessarily the product best suited for their client.” Jansen Shrubb Toronto