# Why is my FA transferring money from a dsc fund into a non-dsc version of same fund?



## pepperbird (Feb 20, 2012)

I see in my statements that my FA has transferred 10% of my dsc mutual fund to the non-dsc version. Why would he do that? 

I understand that generally 10% of the fund can be transferred out without penalty per year, but I don't get why he'd do it at all? Does it mean he thinks its a dog? 

FYI, its: AGF475
http://www.google.ca/finance?q=MUTF_CA:AGF475


----------



## lewin (Jan 10, 2011)

I'd also check for MER differences between the two versions of the fund. Cynical me thinks maybe he is transferring the portion no longer subject to the DSC into another fund that has a higher MER.

Also: Seems shady that he would make ANY transfer without your knowledge.


----------



## GoldStone (Mar 6, 2011)

Is he switching *from* or *to* AGF475?

FYI, AGF475 has multiple sales charge options. FE, DSC or low load. See page 2 here:
https://www.agf.com/t2scr/sharedDistT2scrWeb/doc/pos/EFP_00475_11_E.pdf

Any chance he is switching you to FE or DSC option?


----------



## larry81 (Nov 22, 2010)

Look this thread, this is a common practice among commission based FA...

http://www.financialwebring.org/forum/viewtopic.php?f=33&t=112508



> "Class A Funds are designed with exit fees on the first 6 years.
> However, we have the opportunity to buy 10% each year without charge.
> In most cases, the investor does not buy, and as 10% are not accumulative, we request an annual transfer to the category B without exit fees. "


FYI your advisor is increasing his annual compensation by doing that switch... see the post by marty1234 for a detailled explanation:

http://www.financialwebring.org/forum/viewtopic.php?f=33&t=112508#p397126

important part is "If the front-end fee is waived and the MER is the same, then the advisor pockets extra commission and you effectively benefit from the unlocking. If the front-end fee is not waived, then you've got a reason to get real mad."


----------



## pepperbird (Feb 20, 2012)

larry81 said:


> Look this thread, this is a common practice among commission based FA...
> ...
> important part is "If the front-end fee is waived and the MER is the same, then the advisor pockets extra commission and you effectively benefit from the unlocking. If the front-end fee is not waived, then you've got a reason to get real mad."


Thank you for the response. Now I feel like I understand it.
My stmt says AGF477 (AGF Elements Growth Portfolio DSC - 477) was sold to purchase AGF475 (AGF Elements Growth Portfolio - 475). The AGF475 does not specify DSC, FE or anything else. I'm not sure what to assume. I don't see any fees being deducted from my account on the statement.

Looking at my husband's stmts and now I'm getting really curious. There's another example like this one, where its clearly going from a DSC to one that isn't, but it doesn't say anything about the sales charge. My favourite though, is a third example that says it went from a DSC to FE. I don't see a fee being paid on the details of the account, so I hope that means that the fee was waived?


----------



## larry81 (Nov 22, 2010)

pepperbird said:


> Thank you for the response. Now I feel like I understand it.
> My stmt says AGF477 (AGF Elements Growth Portfolio DSC - 477) was sold to purchase AGF475 (AGF Elements Growth Portfolio - 475). The AGF475 does not specify DSC, FE or anything else. I'm not sure what to assume. I don't see any fees being deducted from my account on the statement.
> 
> Looking at my husband's stmts and now I'm getting really curious. There's another example like this one, where its clearly going from a DSC to one that isn't, but it doesn't say anything about the sales charge. My favourite though, is a third example that says it went from a DSC to FE. I don't see a fee being paid on the details of the account, so I hope that means that the fee was waived?


I strongly doubt it, i am not sure how DSC are charged with AGF funds but i it is almost certain that your FA is double dipping...

Were you informed of the transaction ?


----------



## humble_pie (Jun 7, 2009)

generally speaking the no-load clones have higher MERs to compensate for the absence of load.

i would imagine the FA routinely transferred all his clients' eligible funds including the OP's from from dsc to no-load so he could receive a somewhat higher trailer fee ...

stories like this are so horrible. If the action can be undone why not transfer that 10% out of his grasp.

i'd even sell it just to get the eff away. I'd accept any capital gain that might result & pay whatever sell commission the bleeder might charge. Then if i still liked the sector i'd go buy stocks or an etf at a discount broker ...


----------



## larry81 (Nov 22, 2010)

humble_pie said:


> i'd even sell it just to get the eff away. I'd accept any capital gain that might result & pay whatever sell commission the bleeder might charge. Then if i still liked the sector i'd go buy stocks or an etf at a discount broker ...


thats what i did and i never looked back


----------



## GoldStone (Mar 6, 2011)

pepperbird said:


> My stmt says AGF477 (AGF Elements Growth Portfolio DSC - 477) was sold to purchase AGF475 (AGF Elements Growth Portfolio - 475). The AGF475 does not specify DSC, FE or anything else. I'm not sure what to assume.


He transferred you from DSC to FE version of the same portfolio.

AGF477 is DSC
AGF475 is FE

See fund codes here:
http://www.fundlibrary.com/funds/db/fundcard.asp?id=22763

If you don't see any charges, he probably waived the FE.

Why did he make the transfer? Most likely to collect the higher trailer fees.

477 (DSC) pays up to 0.5% trailer in the first 7 years, up to 1.25% thereafter.
475 (FE) pays up to 1.25% trailer right off the bat.

Trailer fees are specified on Page 2 here:
https://www.agf.com/t2scr/sharedDistT2scrWeb/doc/pos/EFP_00475_11_E.pdf

If you are smart enough to make sense of all this nonsense, you are smart enough to be a DIY investor.

*ADDED:*

Just want to make something clear...

You DID benefit from this transaction. You are still invested in the same portfolio. Your MER is the same. The benefit to you is that 10% of your funds are now free of DSC charges.

Your advisor did benefit as well. He now enjoys higher trailer fee on the 10% he moved.

The only loser is AGF Management. The higher trailer fee comes out of their pockets.


----------



## mrPPincer (Nov 21, 2011)

I'm with the others on this, if you're reading these forums much, then you're probably ready for the next step to DIY investing.

March 31 2011 the annual expenses including trading costs was 2.44% (not including any sales fees)
By building a portfolio with similar market exposure out of lower cost index funds like the TD E-series and sticking to your asset allocation plan you could have similar results but shave off about 2% from your annual costs.

All other factors being equal, according to the rule of 72, a 2% difference in return on your present investments will result in an extra doubling in 36 years.


----------



## MoneyGal (Apr 24, 2009)

GoldStone said:


> Just want to make something clear...
> 
> You DID benefit from this transaction. You are still invested in the same portfolio. Your MER is the same. *The benefit to you is that 10% of your funds are now free of DSC charges.*


10% of his funds were free of DSC before the switch was made. There's no net benefit (and no net cost) to the investor. The advisor took advantage of the units' elapsed DSC schedule to move them to a different version of the same fund. If the advisor had done nothing, those units would still be free of DSC charges.


----------



## Toronto.gal (Jan 8, 2010)

humble_pie said:


> i would imagine the FA routinely transferred all his clients' eligible funds including the OP's from from dsc to no-load so he could receive a somewhat higher trailer fee ... ...


Hmmm, maybe I'm not understanding something, but wouldn't any sort of transfer/sell [even the optional/free annual 10%] require the OP to have made such a request in writing?


----------



## OptsyEagle (Nov 29, 2009)

MoneyGal said:


> 10% of his funds were free of DSC before the switch was made. There's no net benefit (and no net cost) to the investor. The advisor took advantage of the units' elapsed DSC schedule to move them to a different version of the same fund. If the advisor had done nothing, those units would still be free of DSC charges.


No they wouldn't. The 10% DSC free is a use it or lose it feature, annually. If you do not sell 10% one year, you cannot sell 20% the next. It would still be only 10%. So by the switch that this advisor did, the client now can sell 20%, DSC free.

It's a common practise. I wouldn't get too worked up over it. The client has a little more money available fee free and the MERs are the same. Yes the advisor makes a little more money, but there are a lot worse ways for them to come up with for that. This one is certainly one of the better ones for everyone involved.


----------



## Toronto.gal (Jan 8, 2010)

OptsyEagle said:


> The 10% DSC free is a use it or lose it feature, annually. If you do not sell 10% one year, you cannot sell 20% the next.


This is correct as I tried to collect more than 10% some years ago and was told, no can do.


----------



## MoneyGal (Apr 24, 2009)

Hmmm. Good point. I wasn't thinking about the cumulative aspect. For the year in which the units mature, what I wrote is true; if more than a year elapses, you lose the capacity to carry forward the DSC-free units. Probably this just seems like a semantic issue.


----------



## OptsyEagle (Nov 29, 2009)

MoneyGal said:


> Probably this just seems like a semantic issue.


Absolutely. I am quite sure the advisors are doing this for the money as opposed to helping the client obtain DSC free units. Let's face it. If they wanted the client to have DSC free units, they simply could have put them in the fund without DSC charges in the first place.

All that being said, if it wasn't for the DSC free accumulation, I doubt the OSC, IIROC and MFDA would allow these transactions to take place at all.


----------



## MoneyGal (Apr 24, 2009)

Nah, what I mean is, I was responding to the issue of whether the client is or is not "better off" as a result of the advisor's actions. You pointed out that if a year elapses and the advisor has NOT moved the DSC units to a non-DSC fund, the free units are "lost." But my comment was that *at the point at which the units become released from the DSC schedule,* the client is not better off for the advisor to move the units to a non-DSC fund -- it is only if and when that anniversary elapses that the free units are "lost." 

THAT is the difference -- between your post and my post -- that may be "semantics." I don't think the issue of advisors moving units without the client's knowledge (or explicit consent) is just semantics.


----------



## CanadianCapitalist (Mar 31, 2009)

Would a switch such as this from a DSC to non-DSC version be counted as a taxable disposition in a taxable account?


----------



## larry81 (Nov 22, 2010)

CanadianCapitalist said:


> Would a switch such as this from a DSC to non-DSC version be counted as a taxable disposition in a taxable account?


Good question !

From my point of view, this kind of move also add to the complexity of the portfolio...


----------



## MoneyGal (Apr 24, 2009)

CanadianCapitalist said:


> Would a switch such as this from a DSC to non-DSC version be counted as a taxable disposition in a taxable account?


Normally switching between different series of the same fund is not a taxable event. You'd have to read the prospectus to be sure.


----------



## pepperbird (Feb 20, 2012)

Thanks again for the responses.

FTR, I have already opened a basic RRSP acct at TDW for e-Series funds and have requested the transfer of the AGF funds (they're in a RRSP). I'm not sure yet whether I'll sell and incur the penalty or just let them languish as is.

I have such a tiny portfolio that I don't think I'm upset that the FA is trying to make a fraction more from my investments than he was, as long as the MER isn't higher and no fees were charged. Having said that, though, it reinforces my decision to go the DIY route. I'm finding its not actually that easy to do it, but I'm optimistic that once the funds are actually in accounts I have some control over that it'll get better.


----------



## FinancialRebel (Mar 19, 2012)

CanadianCapitalist said:


> Would a switch such as this from a DSC to non-DSC version be counted as a taxable disposition in a taxable account?


No it wont be. When a person does this, at no point are the funds sold or rebought. It's just an internal thing done by AGF in this case.


----------

