One of the more dramatic events to occur in 2010 for investors could be restrictions imposed on the practice of paying trailer fees to financial advisers. The SEC is currently investigating trailer fees in the U.S. (known as 12b.1 fees there) and many observers are betting that some kind of action will be taken.
Indeed, Doug Kass, general partner at Seabreeze Partners, included a SEC clampdown on trailer fees as one of his predictions for 2010. If he is right, the mutual-fund companies will lose a major prop to sales. In one fell swoop, they will concede much ground in the battle with exchange-traded funds. Kass adds that as the clampdown becomes more of a certainty, shares in mutual-fund companies will tumble.
The question in Canada is: Will regulators follow suit? It would seem so given the questionable ethics of paying planners and advisors to recommend mutual funds to their investors. But the Canadian market is small and the mutual-fund companies are big. They are not likely without clout in policy and regulatory circles.