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No new deferred sale charge mutual fund units starting June 1, 2022
February 20, 2022
5:33 pm
Norman1
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Starting June 1, 2022, mutual fund companies can no longer pay any upfront commissions to dealers. Only trailing commissions are allowed:

Ontario Adopting Ban on Deferred Sales Charges for Mutual Fund Sales

That will indirectly kill any new deferred sales charge mutual fund units as the fund company can't pay that upfront 4% to 5% commission to the dealer.

Also, fund companies can no longer pay any trailing commissions to dealers that don't actually provide any advice, like the discount brokers. Not even the ¼% per year trailer on class D units.

February 21, 2022
9:29 am
AltaRed
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This change is far overdue with many submissions made over the years to CSC and OSC among others. A trailing commission should never have been allowed at discount (no advice) brokerages. About 10 years ago, the standard Series A or B of mutual funds were converted to Series D with a trailing commission of no more than 25bp to mitigate the egregiousness of this behaviour. It should have actually moved all the way to Series F mutual funds (zero trailing commission).

Finally this time has arrived. However, this will change the way some discount brokerages deal with mutual fund sales. A few, CIBC Investor's Edge and RBC Direct Investing have announced buy (and/or sell) commissions for mutual fund sales. TD Direct Investing has announced no change to status quo (no commissions). Some others have not yet articulated their intentions.

That all said, more discount brokerages are now offering commission free buy (and/or sell) of ETFs, while others offer a selection of commission free buy and/or sell ETF offerings. There is no particular need these days to buy mutual funds at discount brokerages when commissions have been coming down or being eliminated at discount brokerages. The commission model is slowly being eradicated.

February 21, 2022
11:25 am
Norman1
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Scotia iTRADE has not announced any mutual fund pricing changes yet. But, they have announced changes to funds being sold and held:

After March 1st, 2022 only mutual funds without trailer fees will be available for purchase on the Scotia iTRADE platform.

After March 1st, 2022 if you hold mutual funds you may also notice buy and sell activity within your account. This is due to Scotia iTRADE switching, on your behalf, any mutual fund series with trailer fees into another mutual fund series of the same mutual fund without trailer fees.

Additional Information: These transactions will show up online within your Scotia iTRADE account in your transaction history and display in your transaction history on your account statement in the month they occur.

After June 1st, 2022 only mutual funds without trailer fees will be permitted to be held in your Scotia iTRADE account.

February 21, 2022
4:02 pm
AltaRed
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Agree that discount brokerages will be auto-converting to trailer free funds. Think most of them are saying almost exactly the same thing. This won't trigger a disposition for a different class of the same fund.

February 21, 2022
7:04 pm
Norman1
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I think people who own those savings accounts packaged as mutual funds units will need to watch what their discount broker does on mutual fund commissions.

CIBC Investor's Edge will be charging $6.95 per trade on mutual funds starting March 7. That looks like both purchase and sell trades.

It looks like if I'm parking brokerage cash in ATL5002 or ATL5004 (CIBC High Interest Savings Account) at CIBC Investor's Edge, I better redeem those before March 7 or get dinged $6.95 later!

February 21, 2022
8:15 pm
AltaRed
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On another forum, the status of the ISA deposit accounts (traded via the mutual fund system) was discussed briefly. At least one discount broker said they were NOT dropping the trailer fee version of the ISA and were not going to charge buy (and/or sell) commissions. Best each of you query your specific brokerage on that issue.

I no longer use those ISAs in discount brokerage accounts. There is nothing to be gained ($10k @ 0.25% = a movie ticket and bag of popcorn per year!).

February 22, 2022
7:24 am
Norman1
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That's good to know that those ISA pseudo mutual fund units may be treated differently.

February 22, 2022
9:36 am
AltaRed
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Norman1 said
That's good to know that those ISA pseudo mutual fund units may be treated differently.  

Think they have to do something of that nature. Otherwise, those ISAs become practically useless for holding variable amounts of 'cash' between trades.

March 3, 2022
6:54 pm
dougjp
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Norman1 said
I think people who own those savings accounts packaged as mutual funds units will need to watch what their discount broker does on mutual fund commissions.

CIBC Investor's Edge will be charging $6.95 per trade on mutual funds starting March 7. That looks like both purchase and sell trades.

It looks like if I'm parking brokerage cash in ATL5002 or ATL5004 (CIBC High Interest Savings Account) at CIBC Investor's Edge, I better redeem those before March 7 or get dinged $6.95 later!  

Their letter on the subject was vague, and poorly written at best.

So I wrote them the following;
" After March 7, when you start charging mutual fund transaction fees, are you going to be charging any fees to buy or sell CIBC's Renaissance High Interest Savings Account? If not, can I (and everyone else wanting a savings account) have that in writing please? "
Their response (which I don't mind quoting here, because my question stated that disclosure to everyone is needed);
" Kindly be advised that this commission charged do not apply to Renaissance high interest savings account. " Not even proper grammar. That's what we get for our money these days. sf-frown

The main accomplishment of almost all organized protests is to
annoy people who are not in them.

March 3, 2022
9:48 pm
AltaRed
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What we don't know is whether the trailer fee will continue to apply to these ISAs in all cases. These are deposit accounts and only use the mutual fund system to facilitate buy/sells. They are not actual mutual funds themselves and thus not likely included in the regulatory directive.

I make little, to no, use of these so it won't be a factor for me either way.

April 4, 2022
1:44 pm
Loonie
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A friend reports that he phoned TDDI to find out what would happen with his mutual fund.

He was told it will be converted to a different series, same fund family, same investments.

The MER will decrease from a whopping 2.67 to a more moderate 1.03%. He has been putting up with the high MER because the fund has been successful.

ETFs take note! Some of them are in this range.

April 4, 2022
2:14 pm
AltaRed
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Some boutique ETFs have MER above 50bp and that is a travesty, but there are always people who will fall for these niche products and the industry is happy to create them for that reason. The mainstream broad index ones are almost all under 20bp and usually under 10bp.

Further to my post #10, it appears the broker ISAs will still carry ~15bp trailer fees since these are deposit accounts and not mutual funds.

Most discount brokerages have started converting the Series A or D mutual funds to F series (or new equivalents) as of mid-March and supposedly will complete the process this month. I don't have mutual funds to convert so am only repeating what I read in financial forums.

April 4, 2022
3:35 pm
Norman1
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Scotia iTRADE will take until June 1.

They published a "Mutual Fund Switch Schedule" on their Mutual Funds page.

April 4, 2022
5:32 pm
AltaRed
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Norman1 said
Scotia iTRADE will take until June 1.

They published a "Mutual Fund Switch Schedule" on their Mutual Funds page.  

Not necessarily. They say the switching will start after March 1st (investors will start to see buying and selling activity) and only that one cannot buy mutual funds with trailer fees after June 1st. I am surprised they would let anyone buy funds with trailer fees as late as June 1 given they have to be switched out before then.

April 5, 2022
7:24 am
Norman1
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Scotia iTRADE is gradually switching holdings and giving access to Series F fund units.

For some fund families, the Series F units were still blocked from purchase. Looks like Scotia iTRADE is going through family by family and adjusting their mutual fund order entry system.

A decision has been made on pricing:

Scotia iTRADE is introducing a commission on mutual fund transactions that in part reflects our administrative costs of offering and holding a variety of mutual funds on our platform.

Updated Mutual Fund Commission effective June 3, 2022

Type Current New
Mutual Fund Commission No Charge $9.99 per trade, including switches
Money Market and Investment Savings Account (ISA) No Charge No Charge
April 5, 2022
9:19 am
AltaRed
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The commission model is a reasonable one, albeit TDDI is currently the key outlier so far saying they won't charge commissions. I've suggested in the past that a commission model similar to exchanged traded equities would be a fair compromise. There is no reason to consider a mutual fund security differently in the brokerage system than an equity or an ETF.

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