Trustworthiness of select bank investment data sheets (no Morningstar)

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twa2w
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Re: Trustworthiness of select bank investment data sheets (no Morningstar)

Post by twa2w »

Dan, here is a link that may clarify some things about PPS.

https://www.google.ca/url?sa=t&source=w ... haOAW-oJdQ

From the link it appears the descretionary services are performed by CIBC Trust. The PPS uses a mix of imperial pools and CIBC index funds.
12. The client is also provided with a simplified prospectus or fund facts document required by securities legislation for the Funds prior to investing in the Funds that may be used to comprise the Selected Model Portfolio.

13. The client will then enter into an agreement with the Filer or CIBC ISI, as applicable, (the Account Agreement). The Account Agreement must be approved by the Branch Manager of the applicable Dealer.

14. The Account Agreement includes express disclosure that CIBC Trust will be providing discretionary investment management services in connection with the rebalancing activities. The Account Agreement states that the client appoints the Filer as its agent to retain CIBC Trust to develop and rebalance the portfolios on the terms set out in the Account Agreement. The Account Agreement goes on to include provisions whereby CIBC Trust is appointed by the Filer to provide the rebalancing services for the model portfolios.

15. Under the Account Agreement, the client agrees to pay CIBC Trust the fees set forth in the Fee Schedule for the model portfolios using the Imperial Pools or the Fee Schedule for the CIBC Index Mutual Funds, as the case may be, which amount is used to pay for the services of the relevant Dealer, and CIBC Trust. Fees may be changed from time to time on 60 days' prior written notice to the client.

16. CIBC, as manager of the Funds, continues to be responsible for the fees of CAMI for its services as portfolio adviser to the Funds. Each of the Funds may pay CIBC, as manager of the Funds, an annual management fee of up to 0.25% of the net asset value of the specific Fund. Each of the Funds will also pay its own operating expenses.

17. No management fees will be charged by CIBC Trust or the Filer directly to the clients or to the Funds in relation to the series or class of units of the Funds that are available under the Product.

18. No sales charges or commissions will be payable by the client in respect of any rebalancing activities described below.
DanH
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Re: Trustworthiness of select bank investment data sheets (no Morningstar)

Post by DanH »

Good find. This is helpful. It does still seem potentially confusing for the client - i.e. fees charged by different subsidiaries - depending on how it's presented in proposals and the management agreement. But makes sense that CIBC Trust could act in a discretionary basis (though the registration still looks a little odd...though I'm sure there's a good explanation).
twa2w
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Re: Trustworthiness of select bank investment data sheets (no Morningstar)

Post by twa2w »

DanH wrote:Good find. This is helpful. It does still seem potentially confusing for the client - i.e. fees charged by different subsidiaries - depending on how it's presented in proposals and the management agreement. But makes sense that CIBC Trust could act in a discretionary basis (though the registration still looks a little odd...though I'm sure there's a good explanation).
I agree. If you can't dazzle them with brilliance, baffle them with b******it.
ringyFinance
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Re: Trustworthiness of select bank investment data sheets (no Morningstar)

Post by ringyFinance »

DanH wrote: You have $100k invested in a fund that generated $3k of income. You can invest in a traditional fund that charges 2% per year (embedded...ie, you don't see it but it's charged at the fund level). Or you can use a PPS type service where you invest in the fund and pay fees separately from your account (ie, where the fee is separated from the product).

In the first instance - the traditional fund with 2% embedded fee - the fund generates about $3k of dividends but the fund charges $2k (ie, 2% of $100k) so you get a T3 for $1,000 of income ($3,000 minus fees of $2,000). In other words, the deduction of fees happens at the fund level before you see any income. You then report $1,000 on your return as taxable income.

In the second instance (like PPS) you get a T3 for the full $3,000 of income because the funds don't charge fees directly. So you report $3,000 on your tax return. Separately you have paid - and can claim as a deduction - investment management fees of $2,000 for the year. The net result is the same - net taxable income of $1,000.
I just gave it a long (third) ponder. It makes perfect sense, but I hesitated to accept the explanation whole hog because it doesn't cover the possibility of being charged $2K within the fund *and* being able to deduct $2K from income. I think this sussing out requires more than just an email with the advisor. I will have to ask for a meeting.

I also drilled down into where the fees are entered in the tax return. I put it in Schedule 4 under carrying charges, which eventually ends up in line 221, where it subtracts directly from gross income. It's not like some credits that don't apply beyond a certain threshold. Apart from that, though, I suspect that this particular tax form detail isn't all that relevant.
twa2w wrote:I think your returns are accurate but your overall costs may be higher than the the management fee indicates. The returns quoted would be based on difference between starting and ending balances ( after fees) and adjusting for any contributions or withdrawals. Simple and accurate enough. As for expenses, even with straightforward retail mutual funds there are some costs/expenses which are not fiully reflected in the quoted MER ( or at least that used to be the case) but the quoted returns to the investor were accurate.
If the returns are correct, then it would seem that the caption on the bar chart is wrong. I'm not sure how typically rigorously correct the terms are in monthly account statements, but this suggests that they can be pretty lax with the terminology.

You said that mutual fund MERs don't cover all expenses. Since MER covers both management fees and operating fees, this means that there are even other fees apart from those. This gets curiouser and curiouser :( .
ringyFinance
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Re: Trustworthiness of select bank investment data sheets (no Morningstar)

Post by ringyFinance »

*twa2w* provided info on some kind of legal/regulatory decision on CIBC Securities Inc.

Thanks, twa2w. But I have to be honest, that's deeper than I will realistically be able to plumb the depths of in any way that makes sense to me. There is a filer, there is ISI, there is CIBC Trust, and on and on. I'm sure it makes sense for those in the business, but I'd have to change professions in order for me to get knowledgeable enough to utilize that information.

However, I was motivated by the opening paragraph to look back 10 years in my files for a prospectus or fund facts. If I ever had them, I haven't kept them. I've been keeping abreast of this thread, but I should be able to compose an email to my advisor by this weekend.
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