Posts Tagged ‘Basis Points’
Wednesday, June 15th, 2011
By Marc Lamontagne, CFP, R.F.P., FMA
Over the years there have been numerous debates about whether trailers should be considered a fee or a commission. Adding to the confusion are industry stalwarts (including yours truly) who have argued convincingly on both sides, but new research suggests we may be wasting our collective breath.
The results of the 2010 Advisor Survey Report by To Fee or Not To Fee (TFONTF) and co-sponsored by the CIFPs indicate that the trailer fee compensation model may be gaining traction in Canada.
Thinking of your gross earnings over the last 12 months, which one of the
following methods represented the largest percentage of your earnings?
This question was designed to reveal which method of compensation is the largest segment of an advisor’s compensation in a particular compensation model (fee or commission). Investment commissions, trailers, and insurance commissions dominate the compensation of commission-based advisors.
On the other hand, basis-points and, interestingly, trailers dominate the compensation of fee-based advisors. There is also a smaller group of fee-based advisors who rely on hourly fees as their main compensation staple.
Perhaps the trailers showed up second for both groups because of the participants’ interpretation of whether trailers are a fee or a commission. Maybe they are neither, but simply a third form of compensation favored by both groups.
Nevertheless, trailing commissions (trailers), AKA service fees, dominate the compensation of a large segment of both commission and fee advisors. For this reason TFONTF would like to declare trailers as a third, and distinct, form of compensation in addition to fees and commissions. This new view of trailers will change the focus of future advisor surveys.
Though MFDA advisors in both camps favor trailers, it simply cannot be explained away as a solely MFDA model (perhaps due to the lack of access to an in-house fee-based account) because there is also a high rate of usage by IIROC-licenced advisors.
Tags: 12 Months, Basis Points, Cfp, Collective Breath, Compensation Model, Confusion, Debates, Fma, Gaining Traction, Gross Earnings, Hand Basis, Industry Stalwarts, Inroads, Investment Commissions, Participants, Segment, Staple, Survey Report, Surveys, Trailers
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Thursday, December 3rd, 2009
This weeks selection is a thematic group of articles which focus on the Canada/Emerging Markets theme.
The first three articles are focused on a discussion of strong Canadian fundamentals, and led by pro-Canada, pro-commodities arguments from David Rosenberg, Chief Markets Economist, Gluskin Sheff. The subsequent three articles provide strong indications of demand from emerging markets, particularly China, whose savings are unequalled anywhere in the world, where more cars are now sold than in the US, and an outlook from Merrill’s Francisco Blanch that oil could reach $100 in the next year.
This is where Canadian strength relative to the United States comes into play — nearly 45 per cent of the TSX composite index is in resources; almost triple the share in the United States. Almost 60 per cent of Canada’s exports are linked to the commodity sector, roughly double the U.S. exposure.
This explains how it is that the Canadian equity market has managed to outperform the S&P 500 this year by a cool 2,000 basis points (in this sense, Canada is basically a low-beta way to play the emerging markets via commodity exposure).
Moreover, considering that the Canadian dollar enjoys a 65-per-cent correlation with the CRB index, the added boost from the appreciation in the loonie means that an American investor putting money in Canada would have garnered a 28-per-cent gain on a currency-adjusted basis (versus a 4.0-per-cent gain from the S&P 500).
The Canadian stock market has been the star of the show over the past decade. With the help of a strong currency, the S&P/TSX composite index has beat the S&P 500 in eight of the past 10 years (in Canadian dollar terms), and nine out of 11 when 2009 is included. And there are persuasive arguments why this will continue.
A report by Scotia Capital entitled “Why you want to own Canada” nicely summarizes them. It points out that Canada’s main attributes are: 1) emerging-market exposure with lower volatility; 2) cheaper valuations relative to the MSCI World Index; 3) stronger domestic fundamentals; 4) Canadian dollar strength relative to the U.S. dollar and British pound; 5) proximity to the U.S. economy; and 6) above-average market capitalization companies in financials, materials, technology and industrials.
In a recent Globe column, David Rosenberg referred to Canada as a “low beta [less volatile] way to play the emerging markets via commodity exposure.” He went so far as to say, “this period when the Canadian market outperforms its southern peers is barely halfway done.”
If there is one thing that Canadians are never happy with (in addition to their local hockey team) it is the Canadian dollar. When it was flirting near that record low of 62 cents nearly a decade ago, everyone lamented the future of the loonie. It was too expensive to buy anything that was imported, it was too costly to make that annual trip to Florida, and tickets on Broadway were prohibitively expensive. We felt poorer. We must have been doing something wrong.
If Americans have been the world’s greatest consumers, the Chinese have been its greatest savers
It is testimony to the resilience and resourcefulness of the Chinese people that, so soon after these terrible times, their country is positioned to lay claim to the paramount role in a new world order of the 21st century. Only 15 years ago, China’s manufacturing output was only one-fifth that of the United States. Now, it is about two-thirds and rising; IMF data show a dramatic rise of annual per capita income to $3,180 (U.S.) in 2008 from only $350 in 1990, lifting more than one-third of a billion people into China’s standard of middle class.
CHINA’S car market has overtaken America’s in sales volume for the first time, several years earlier than analysts had predicted before the financial crisis. Plummeting demand in the West is to blame. Earlier this year, as the American government was buying 61% of General Motors and 8% of Chrysler to prevent them from collapsing, the two manufacturers’ sales in China were rocketing. GM’s sales in China in August more than doubled on a year earlier. For 2009 as a whole the company predicted a 40% rise. Sales of all car brands in China in August were up by about 90%, helped by a cut in the purchase tax on smaller, more fuel-efficient cars. There is also huge pent-up demand as a new middle class takes to the road.
October 26 2009 19:40 | Last updated: October 26 2009 19:40Crude oil prices could push above $100 a barrel heading into 2011 due to a combination of a cyclical improvement in demand, the rapid weakening in the US dollar and strong global liquidity growth, says Francisco Blanch, head of global commodities research at Bank of America-Merrill Lynch.
Tags: Adjusted Basis, American Investor, Basis Points, Canadian Dollar, Canadian Equity, Canadian Stock Market, Commodities, Commodity Sector, Crb Index, David Rosenberg, Dollar Terms, Emerging Markets, Globe Investor, Gluskin Sheff, Investment Ideas, Investor Investment, Loonie, Star Of The Show, Thematic Group, Tsx Composite Index
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