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www.insideHALTON.com | OAKVILLE BEAVER | Thursday, July 2, 2015 | 22 Dollars & Sense Guest Contributor Peter Watson I Mutual funds have hidden fees: report RAISE YOUR HAND FOR CANADA Canada's abundant oil and natural gas keeps us moving. We are fortunate to have energy the world needs. But we have a challenge in getting it there. Working together to find ways to get our products to new markets will create jobs and government revenue to pay for healthcare, education and infrastructure for our future. Think energy developed the Canadian way is good for Canada? Then now is the time to say so by raising your hand at Not actors. Real Canadians. raiseyourhandcanada.ca R0023327671-0702 check us out online at www.insidehalton.com/oakville-on nvestors suffer because of mutual fund fees. Now, we have another research report that explains some of these failings. The Canadian Securities Administrator (CSA) published the Mutual Fund Fee Research report in June. Our interpretation of the report is that mutual fund companies and those investment salespeople who sell mutual funds should be doing a better job. The CSA is responsible for the securities regulations of all provinces. Its website says the CSA protects Canadian investors from unfair, improper or fraudulent practices and fosters fair and ef cient capital markets. In other words, the CSA is there to protect you, the individual investor. Its observations should be an embarrassment to the many rms that do not have a client-friendly method of charging fees. The report says higher embedded commissions stimulate sales. Because mutual funds are sold, that simple comment says there is more effort selling funds that pay higher sales commissions. The investment services industry is a business. The motivation of a business is to make a pro t. That is a concept that virtually all investors can accept. Embedded fees is just a polite way of saying the investor is charged a fee without being aware of that fee. Virtually no investor would think that is fair. And it is not. Another nding was sometimes investment recommendations favour investment options that pay the salesperson higher commissions. This revelation is not new. In a previous column, we reviewed the ndings of a University of Toronto professor whose research found a direct correlation between the amount of mutual fund commissions and the amount of sales of those mutual funds. Funds that paid higher commissions were sold more often than funds paying a lower commission. Her breakthrough research was based on 20 years of data from the U.S. The report also said funds that pay commission underperform funds that don't pay commission. The reason is commissions, which are paid to the see Seek on p.23