To fee or not to fee? That is the question

After the financial crisis of 2008-09, governments around the world started looking at ways to make the investment business more ethical and transparent to consumers.

Some countries are changing the compensation system for financial intermediaries. Instead of allowing product providers to pay commissions to product sellers, they want consumers to pay sellers directly for their services.

Embedded commissions are hidden from consumers and represent a conflict of interest that makes financial advice less reliable.

Suppose you’re buying mutual funds and don’t know which ones to choose. Your advisers may urge you to buy funds that pay them better commissions. Stock funds, for example, are more lucrative than bond funds.

Mutual fund sellers may push their own house-brand funds at the expense of other equally good funds. Or they may push you to borrow money to invest, thus increasing the assets they manage and their commissions.  Read More…

This article has 8 Comments

  1. Justus Larson

    Well at least we are seeing movement to help consumer protection.

  2. Omarion Steele

    Now that the naked default swaps were exposed as outright fraud these banks are looking to their latest scam.

  3. Quinn Bonnell

    I think this practice should be outright banned. No thank you with the disclosure idea.

  4. Long Nickolson

    Disclosure just means banks and others will hopefully stay honest with their customers. Sadly, with most corporations being very tied with politics then seeing new regulatory rules for transparency is very unlikely.

  5. Ruben

    Practices like this is no different from any other developed nation. If a nation has not adopted it, assuming they are capitalistic, will eventually do so as well.

    What surprises me more is how long Canada, and others have taken to realize this was eggregious.

  6. Ariel F

    Hidden fees? Come again?

  7. Jovanny D

    This is the first time i’ve heard of them.

  8. Sen Sessions

    I’ve been saying the same thign for years. These hidden fees must be fully disclosed if we are going to ever have any sanity in the marketplace.

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