No new deferred sale charge mutual fund units starting June 1, 2022 | General financial discussion | Discussion forum

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.

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.

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!).

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.

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.

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.

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.

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.