Company offers fee refund
The mutual fund marketplace is ever more competitive. Full-service brokers, discount brokers, financial planners, insurance brokers, and sales reps compete for a share of a shrinking marketplace.For investors, the slow market provides an opportunity to save some money by cutting your sales commissions to the bone. Many fund sellers will accept a reduced commission to keep your business. Others are offering attractive incentives.One example is a new Toronto based firm called ASL Direct.
How it works
What makes them unique is that they are the only company that we know of that will refund the annual trailer fees paid to sales reps by the fund companies. If your account is large enough, that could be worth hundreds of dollars a year to you.
Here’s how it works. You set up a primary account with the company for a fee of $29.95 a month. If you have both a registered account (e.g. an RRSP) and a non-registered one, they count as a single account for fee purposes.
A second family account, for example in the name of your spouse, costs $19.95 a month with the same conditions. Subsequent accoun cost $11.95 a month.
Your monthly fee allows you one free transaction a month. Each additional buy or sell costs $9.95, no matter how large the purchase or the type of fund involved.
If you are currently paying sales commissions, this price looks very attractive. However, if you invest mainly in no-load funds it can add to your costs, so work through the numbers before you make a decision.
The company says the monthly fees are tax-deductible. However, this does not apply to annual administration charges on RRSPs and RRIFs, which can run as high as $125.
Will refund fees
The pay-off is the refund of the trailer fees, which can run as high as 1.5 per cent a year on equity funds. However, they are much lower on money market and fixed income funds. So if your account is heavily weighted towards those, this may not be a deal for you.
If your total account is relatively small, you won’t make money here.
But if you have accumulated substantial assets over the years, you could be in line for some big cheques.
For example, suppose your account is worth $250,000 and 60 per cent of it is in equity funds. If the average trailer fee on those funds is one per cent, you’ll receive $1,500 a year from ASL.
The trailers on the other 40 per cent of the portfolio will be smaller, but they’re gravy. You would have already earned back your fees and much more.
Adapted from the June 2002 issue of Mutual Funds Update.