They say the 80’s were they hay days for mutual fund companies. Fund companies used to send advisors on exotic vacations costing many thousands of dollars per person. I know a few advisors and one who was has been in the business for over 30 years told me that on Bay Street, it was not uncommon for a fund reps to come in with a bag of cocaine during office hours for brokers to indulge in. Nights at strip clubs and rub n’ tugs with tabs running into the many thousands were also normal. Not everyone indulged, but anyone who didn’t indulge turned a blind eye.

In case it isn’t clear, it was the investor who had to pay for these “team-building” exercises. That means MERs (Management Expense Ratios – the annual costs charged to run a mutual fund) were higher.

But a strange thing happened in the late 90’s. Fund companies couldn’t do this sort of thing anymore (someone figured out this stuff was wrong!). Now an advisor has to fill out a co-op request form that is approved by compliance departments for any expenses a fund company pays for, and this is usually limited to hosting seminars and mail-drops.

So “team-building” budgets were essentially abolished, yet MERs aren’t that much lower. But fund company profit margins are higher.

So – do you still think they are looking after YOUR best interests? Time to wake up and smell the coffee.

Tags: blind eye, budgets, cocaine, coffee, compliance departments, exotic vacations, hay days, investor, mail drops, management expense ratios, margins, mutual fund companies, seminars, strange thing, strip clubs, strippers, tabs, team building exercises, thousands of dollars, tugs