RBC woos DIY investors with increased Series D offerings

BlackRock, Invesco and Mackenzie Investments create low-fee Series D mutual funds.

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mutual_funds_322RBC Direct Investing didn’t exactly endear themselves to their DIY investing clientele last year when they stopped offering some of Canada’s best and cheapest actively managed mutual funds from Mawer, Steadyhand and Leith Wheeler. This trio of fund companies generally don’t charge any trailing commissions (the 1% fee mutual fund investors typically pay their advisers or dealers each year they own an investment). This meant RBC wasn’t making any money from its customers who bought them through their discount brokerage, so the inexpensive funds were unceremoniously dumped with no advance notice.

Realizing, however, that more and more Canadians are now able to manage their own portfolios and don’t want to pay high MERs for advice they don’t require, RBC is now aggressively making a play for a bigger share of the discount market (and perhaps hoping to regain some of those customers they lost last year)—even if that means its advisers and dealers will earn substantially less in trailing commissions. Late last week, the financial institution announced it is more than doubling the number of low-fee Series D mutual funds currently offered through its Direct Investing platform thanks to new Series D funds being created by BlackRock Canada, Invesco Canada and Mackenzie Investments. The new funds will be available for purchase at RBC Direct Investing in the coming weeks, subject to regulatory approval.

While everyone is remaining tight-lipped for now about the fees and trailing commissions attached to these new funds—which involve every type of asset class and fund category—a MoneySense source says the MERs will come in at F-series pricing plus a 0.25% trailing commission per annum. Therefore, expect bond funds to be anywhere from 0.8% to 1.2% (some firms are more expensive than others, and some are more aggressive on F-series pricing than others). DIY investors, however, will probably be most interested in the Series D stock funds and global balanced funds, whose MERs (including trailers) will likely be in the range of 1.3% to 1.5%.

Don’t forget too that RBC recently dropped its D-series fund investment minimums from $10,000 to $500. Self-directed investors with small amounts of income will soon have easy access to a wide variety of inexpensive actively managed mutual funds through RBC Direct Investing.

2 comments on “RBC woos DIY investors with increased Series D offerings

  1. I think RBC stopped offering these funds because they weren’t paying a trailer or a load. RBC could have solved the problem by charging a modest transaction fee on the buy or sell. Instead they just cut them off. A nickle and dime approach that was a huge disservice to clients. These new D Funds RBC is creating will have no track record. The Mawer funds in particular had long track records of exemplary performance and as such offered an inexpensive way to add some GOOD active management to an index/passive investment strategy. I voted with my feet. Closed my RBC account and moved to another institution that continues to offer quality no load / low fee actively managed funds. And as for trailers on direct investment platforms…..why does a DIY investor have to pay trailers in the first place? What are we receiving in return for these trailers?

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    • The previous commentator discussing the unwillingness of RBS Direct Investing to allow the purchase of Mawer and other investment funds is spot on. This broker told me (coming indirectly from the Vice-President), that while they would not buy Mawer funds for clients, they would permit a transfer in of a Mawer fund and would also allow a client to then sell the fund, or a part thereof, if they wished. The broker uses trailer fees to just cover some of their general expenses, as no advice is given regarding funds that do pay trailer fees. This is unethical, as trailer fees are meant to cover advice — though this is seldom given on an on-going basis to brokers who do give advice. Shame on RBC Direct Investing !

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