The Elderly and Investor Protection

It's long been known that seniors are especially vulnerable to the financially devastating impact of
adviser abuse, frauds and scams, and there are several reasons for this. A recent study by a researcher
from the U.S. Federal Reserve and a professor at the University of Texas is a recent of many to suggest
that one reason is the declining mental faculties of senior investors, which negatively impacts their
personal financial management. Korniotis, George M. and Kumar, Alok, "Does Investment Skill
Decline Due to Cognitive Aging or Improve With Experience?" (July 2007). Available at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=767125 Physical acuity, emotional
issues or dementia increase vulnerability. A half-million Canadians currently suffer from some form of
dementia, a figure the Alzheimer’s Society of Canada expects to reach 1.1 million within a generation.

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Actively Managed ETFs – Worth a Look?

The mutual fund industry has been very competent marketers. Over the years, they’ve invented clone funds, tax-efficient funds, U.S. dollar funds, sector funds and even sub-sector funds like the Internet infrastructure funds. Bay Street never sleeps. In late 2009, Invesco Trimark blurred the lines between mutual funds and ETFs with its PowerShares funds. ETFs followed the innovation lead by adding fundamentally indexed funds, leveraged ETFs and inverse ETFs. Now, there is the actively managed ETF, the subject of this article.

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Why Another Article on Borrowing to Invest?

There have been many articles written on the benefits and risks of borrowing to invest (leveraging). For instance, we’ve all been told that if you put $100,000 into a mutual fund–using $25,000 of your own money and a $75,000 loan–and the fund gains or loses 10 % or $10,000, that would actually be a 40 % gain or loss on your original equity–before loan costs. So why another piece on the topic?


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"Fund Facts" is Coming

The Canadian Securities Administrators (CSA) has authorized a new disclosure document for mutual fund investors. It’s called Fund Facts (FF) and you’ll receive it when you’re sold a mutual fund. It is a dumbed-down version of the detailed simplified prospectus. It highlights key information for investors, including the fund performance, risk and the costs of buying and owning a fund. Regulators believe short, summarized disclosures of key information, such as the Fund Facts document, are more likely to be read by retail investors and at least somewhat understood than are longer fund prospectuses. You will no longer receive the simplified prospectus unless you ask for it. Despite FF being only 2-4 pages in length it attempts to provide the key facts of the mutual fund. In any event, make sure you understand the objectives of the fund (not well articulated in FF – seeing what the fund invests in is not the same as understanding its objectives).

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G20 High-Level Principles on Financial Consumer Protection

The high-level principles were developed as a response to the G20 Finance Ministers and Central Bank Governors call in February 2011 for the OECD, the FSB and other relevant international organisations to develop common principles on consumer protection in the field of financial services by their 14-15 October meeting.

They were developed by the Task Force on Financial Consumer Protection of the OECD Committee on Financial Markets (CMF), in close co-operation with the FSB and its Consultative Group, other international organisations and standard setter bodies and consumer and industry associations. The Task Force is open to all G20 and FSB members. It held several rounds of consultations, including a public one, on different versions of the draft principles. A final version of the draft principles was discussed and endorsed by the

Task Force on 14 September and transmitted to the CMF and the FSB. The Final High-level Principles on Financial Consumer Protection were endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on 14-15 October 2011.

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Mutual Fund Loads, Fees and Other Expenses

Mutual fund fees are the costs of running a mutual fund. They are disclosed in the simplified prospectus. What investors don’t readily see or comprehend and aren’t readily explained by their salespersons is how the method of sale effects their ongoing trailer commissions and, of course, fund returns. The simplified prospectus does have a section “Impact of Sales Charges on Purchases of Mutual Funds,” showing the amount of loads you would pay under different purchase scenarios covering 1-, 3-, 5- and 10- year periods. (Firms assume a 5% growth rate in order to calculate the future years impact.)

A controversial study that found Canada’s fund fees are higher than 18 other countries has been a thorn in the side of the mutual fund industry ever since Peter Tufano, Ajay Khorana and Henri Servaes published it in 2006. Read the full article