Frequently, the portfolio is fragmented among several financial institutions, without any overall investment strategy. In other instances, the portfolio is left with a financial advisor who simply continues to divvy up RRSP contributions among various mutual fund companies year after year. Often the advisor is not licensed to sell anything but mutual funds. The result is that the investor owns a hodgepodge of 30-40 mutual funds with overlapping content and investment styles. The client's investment collection is reminiscent of a tangle of Christmas lights, with several varieties of equity funds, bond funds, labour sponsored funds and emerging market funds tossed together.
Most clients are unaware of how much the investment advice they receive actually costs.
MERs are deducted directly from clients' RRSPs and non-registered accounts and are not tax deductible. And this doesn't include any deferred charges. The industry rationale for this charge is that mutual funds are intended to be a long-term investment. The main disadvantage of most WRAPs, however, is that they are not portable. If the client or the broker wishes to change firms, the WRAP cannot be transferred.