Our view of fees
IceCap Asset Management firmly believes that because investment costs and advisory fees come directly out of client returns, controlling expenses is a critical factor. Just like customers and clients in any other business, investment clients should know exactly the amount of fees they are paying. Fees should be simple, transparent, and above all fair.
Unfortunately, many investors are unaware of how much they are paying in fees, and why the industry lacks transparency with this all-important aspect of the investing. Around the World, the investment industry is highly focused on the interests of those who already have substantial financial assets. As a result, the industry’s obsession with preferring the wealthy client over all others, means the majority of investors do not receive the professional service, and optimal performance they deserve at a fair price.
This is why there is so much effort to obscure and hide the financial and investment costs that clients actually pay. The more the true cost can be hidden and the services offered as supposedly “free,” then the easier it is to profit from the client, but not necessarily serve his or her best interests.
Results from recent global studies (source: Mutual Fund Fees Around the World and Morning Star) show Canada to have the highest mutual fund fees in the world. These high fees are a direct result of the way the Canadian investment industry is structured and directly contribute to investors achieving lower returns than they otherwise deserve.
Also of interest to every Canadian investor is the Management Report of Fund Performance. Every mutual fund in Canada is required to file this report on a semi-annual and annual basis. It is very useful and interesting as it provides performance analysis as well as complete details on all fees paid within the fund. Unfortunately, very few investors understand the data within the report (it isn’t a pleasant Sunday afternoon read that’s for sure), and worse yet most are not even aware that it exists.
The industry and fees
The investment industry is no different than any other industry in the world. All contributors must make a profit, otherwise, that function would cease to exist. The investment industry can be broken down as follows:
|Industry Player||Commonly Known As||Responsibility||Approximate Annual Fee|
|Manufacturer||Investment Manager, Portfolio Manager, Fund Manager||Decides which stocks (etc) to buy and sell||1% and higher|
|Distributor||Advisor, Broker, Financial Planner, Sales Agent||Selling various funds and products||1% and higher|
|Support||Administrator, Auditor, Custodian||Performing crucial behind the scenes work||0.25% and higher|
Altogether, total fees usually range between 2% to 3% which is very expensive relative to other countries in the world. When also considering the fact that most investment managers do not outperform their relative benchmarks* it is little wonder that investors are not achieving their investment goals and objectives. To top things off, this fee usually doesn’t even include discretionary management.
At IceCap Asset Management, our investment approach and our outsourcing strategy allows us to completely eliminate the distributor or advising fee, while also providing lower fees for investment management and administration. In short, our goal is to reduce your total investment fees.
Today most investment providers have their fees wrapped (which means the investment management fees, the advisor fees, and administration fees are all included in one price). This fee is either charged outside of your portfolio so that you can indeed see it, or it is charged internally (within mutual funds) where you do not see it.
Our belief in providing complete transparency means we explicitly state each and every fee you pay, and never hide these fees within a mutual fund or product.
As such, our fee scale is as follows:
|Tier||Portfolio Value*||Annual % Fee|
|First||$ 1 million||1.00 %|
|Next||$ 4 million||0.75 %|
|Next||$ 5 million||0.50 %|
|Above||$ 10 million||0.25 %|
* Minimum portfolio value: $250,000