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Mutual Fund News

Snowbirds not the only ones migrating

Some of the biggest advice firms say their ranks are flying from the MFDA to the IDA, KEITH DAMSELL writes


Some of the country's biggest financial advice firms report a growing number of advisers are leaving the Mutual Fund Dealers Association of Canada in favour of professional designation with the Investment Dealers Association of Canada (IDA).

"We have requests from so many advisers in our distribution side to get to the IDA side that we are working as hard as we can to get them over," said Frank Laferriere, chief operating officer and chief financial officer at the Berkshire Group of Cos., which includes Berkshire Investment Group Inc. and Berkshire Securities Inc. The Burlington, Ont.-based investment firm reports close to 400 of its estimated 900 advisers now hang their hat at the IDA and more will follow.

It's much the same story at the Investment Planning Counsel of Canada Ltd. and at Dundee Wealth Management Inc.

"It's a definite trend," said Chris Reynolds, IPCC president. Every month, four to five of the Mississauga company's team of 550 advisers leave the MFDA and joins the IDA, he said.

Dundee, meanwhile, is in the midst of training the bulk of its 2,000 advisers at considerable expense in order to shift the team from the MFDA to the IDA, Ned Goodman, Dundee chairman, president and chief executive officer, told a Toronto investment conference last week.

The migration is all about the ability to better serve customers by offering them a broader choice of securities, executives report.

The MFDA's members and their employees are mutual fund distributors; the group regulates their activities. The IDA, in contrast, has a broader mandate. It is a regulator and a trade association for full-service brokers. Member firms and their staff sell securities, including mutual funds, stocks and bonds.

The regulatory regime for both groups is the same.

"It's not a case of them [new IDA advisers] wanting to automatically become stock jockeys; it's a case of them wanting to service their clients," Mr. Laferriere said.

For some companies, cost is an issue, too. Many financial service firms are members of the IDA and the MFDA and pay dues to both organizations.

"There is no major push" to move Assante Corp.'s 800 advisers from one platform to another, said Joe Canavan, president and CEO of the Toronto firm. Nevertheless, "we certainly believe that one regulator is better than two. That would reduce paperwork and costs . . . for our advisers, our company and ultimately, for our investors," he said.

Larry Waite, the MFDA's president and CEO, was unavailable for comment. But in a recent interview, he played down suggestions that the eight-year-old regulator is shrinking in size or relevance. The MFDA's membership of 70,000 advisers oversee about $260-billion in mutual fund assets.

"There is not this groundswell . . . of people who want to be full-service brokers," he said.

Despite Mr. Waite's assurances that all is well at the MFDA, the adviser designation debate should make for some interesting hallway chatter at 121 King St. West. Strange as it may seem, the MFDA and the rival IDA call the same Toronto office building home.

No quenching trust thirst

The public's thirst for income trust products appears to be as deep as Lake Ontario. As of Sept. 9, about $4.3-billion has been raised in exchange-traded "fund of funds," income trusts that specialize in managing diversified portfolios of other income trusts. In addition, there are seven new fund of funds initial public offerings currently on the market that could raise a further $700-million, reports Canaccord Capital Corp. of Vancouver.

The total of $5-billion is a staggering sum considering there are four months left in 2005 for further Bay Street wheeling and dealing. In all of 2004, trust-heavy fund of funds raised a total of $3.7-billion.

Lifetime ban imposed

The B.C. Securities Commission issued its maximum penalty last week -- a $250,000 fine and a lifetime ban -- against a former Investors Group salesman who bilked clients out of about $1.6-million.

Paul Robert Maudsley of White Rock, B.C., has been banned for life from trading securities, serving as a director or officer of a public company and engaging in investor relations. He must also pay a $250,000 fine and $60,000 in costs.

Between 1996 and 2003, Mr. Maudsley and his company, Shaylor Management Ltd., preyed on the sick and aged in the affluent suburb south of Vancouver, according to the BCSC ruling. He defrauded a paraplegic client out of the proceeds of his insurance settlement; he ransacked trust accounts held by a quadriplegic and a schizophrenic, the commission said. Half of his victims were over 70 years of age.

In total, he convinced 23 clients to redeem about $1.6-million in mutual funds and other investments. The cash was used "to fund his personal and lifestyle expenses," the commission said, including self-admitted addictions to gambling, alcohol and cocaine.

Investors Group, a subsidiary of Winnipeg's IGM Financial Inc., has compensated the victims by paying out more than $2.3-million.

© 2007 The Globe and Mail. All rights reserved.

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