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Marketing is a critical component of every business, and the investment industry is no different. But an industry trusted with the management of individuals' life savings should be held to a higher standard.

To an extent, it is. Regulators occasionally inspect the marketing materials of portfolio managers and mutual fund sponsors. But some ads that play by the rules still stretch and spin the truth, or they mislead their target audience. I've tacked this issue before in August 2014 and in March 2010. Ads that have caught my eye more recently are more subtle.

Mutual fund performance advertisements are as old as the industry, and in the past, claims in ads were more liberal than they are today. Recently, I've noticed a few fund companies advertising performance for F-series units of their funds. Most that I've seen are in mainstream publications, aimed primarily at those outside of the investment industry. In my opinion, this is misleading.

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F-series funds were launched around the year 2000 and were designed for fee-based advisors — those who charge a separate fee for advice rather than being paid by product commissions. They are available from financial advisors, which means paying annual fees on top of the product fees, reducing advertised performance.

So it's a little puzzling that fund companies are promoting F-series funds primarily to people who can't access them without extra annual fees (i.e. clients of fee-based advisors). A handful of discount investment dealers have offered F-series directly to investors since the early 2000s, but all but one of those offers are gone.

Discount broker Questrade offers clients access to F-series funds for a small per-trade cost, but they don't advertise it. Relatively few people know this service exists including some fund companies whose F-series funds are listed with Questrade. Accordingly, the vast majority of F-series investments are made by investors paying additional annual percentage fees to access these funds.

One recent ad for an equity fund's F-series units showed an average annual compound return of 11 per cent for the five years through March 31, 2016, but the vast majority of those who purchased this fund five years ago (or today for that matter) had to pay an advisor separately for advice to access it. This separate fee is typically 1 per cent plus the GST/HST of the value of the investment — on top of the F-series fund management expense ratio — so the effective return enjoyed by most clients would have been closer to 9.8 per cent per year.

That's solid performance, but it's not what's advertised. To add insult to injury, the fine print under this ad is the standard mutual fund disclaimer, nothing specific to F-series funds and the fees that normally apply.

The industry says that promoting F-series is the new standard because it isolates the performance that fund managers achieve. The industry also points out that F-series funds are most comparable to ETFs. In theory, this is true, but with one important difference.

Anybody who sees an ETF advertisement can buy the exact ETF being advertised with nothing more than a nominal trading cost from any brokerage account and no extra annual fees. Not so with F-series funds, save for the one small broker that doesn't promote F-series access.

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It may be the new normal, but I still think it's misleading to promote fund performance that is unavailable in most investment accounts. Regulators are likely to scrutinize F-series fund ads and associated disclaimers in future rounds of marketing reviews. These ads need to clarify the additional costs that are typically incurred to invest in these products. And it would make more sense to show A- and F- series together in ads. As investment fiduciaries, fund companies should be held to a higher standard than what I'm seeing in these ads.

Dan Hallett, CFA, CFP is a principal with Oakville-Ont.-based HighView Financial Group, which acts as an outsourced chief investment officer for wealthy families and foundations. He also contributes to The Wealth Steward blog.

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