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Advisor News Mutual fund advisors at Peak gain access to platform-traded funds

Platform-traded funds have lower management fees than traditional mutual funds because PTFs transact and settle similar to ETFs. But unlike ETFs, PTFs have no minimum investment requirements and orders are filled at end-of-day net asset value.

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Montreal-based Peak Investment Services Inc. will be the first mutual fund dealer to offer financial advisors direct access to platform-traded funds (PTFs) on Toronto-based Aequitas Innovations Inc.’s NEO Connect investment fund distribution platform.

This development comes more than a year after NEO Connect and Toronto-based Univeris Corp., which provides enterprise retail wealth-management software for Canada’s mutual fund dealer channel, announced a partnership in April 2018 to provide mutual fund-licensed advisors access to PTFs – mutual funds designed for fee-based advisors and their investor clients that transact and settle in a similar way to exchange-traded funds (ETFs).

The move means that Peak advisors licensed to sell mutual funds will gain access to a new suite of products with fees that are usually below those of Series F mutual funds, which also are for fee-based advisors and their clients. For example, PTFs from Invesco Canada Ltd. have an average cost savings of 35 basis points (bps) to 40 bps compared with their mutual fund equivalents.

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Gaining access to PTFs will help mutual fund-licensed advisors compete better in an investment landscape that’s focused greatly on fees.

“We want to make sure we have the biggest basket [of products] possible for advisors,” says Robert Frances, chairman and chief executive officer at Montreal-based Peak Financial Group Inc., Peak Investment Services’s parent firm.

Peak has been a leader in offering advisors who are licensed by the Mutual Fund Dealers Association of Canada (MFDA) with products typically reserved for those who have a securities licence. The firm began providing its mutual fund advisors access to ETFs in late 2016. It’s currently the only firm to now offer all advisors access to PTFs.

Access to the NEO Connect platform was previously available only to advisors licensed by the Investment Industry Regulatory Organization of Canada (IIROC). NEO Connect’s partnership with Univeris led to new technology that gives MFDA-licensed advisors access to PTFs, the companies announced.

“Advisors have an appetite for new, innovative products that can be helpful for their clients, especially with all of the innovations and technology [being developed] these days,” says Mr. Frances. “PTFs fit very well with that way of seeing the future.”

Peak Financial Group has a network of 1,500 independent MFDA- and IIROC-licensed advisors, professionals and employees who serve more than 150,000 clients and have more than $10-billion in assets under administration.

Jos Schmitt, director, president and CEO at Aequitas Innovations, described the announcement as a “game-changer for the asset-management industry” that also levels the playing field for advisors and investors.

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“The most-efficient way to transact mutual funds at the lowest cost has been inaccessible to a large segment of the advisor community and their client investors – until now,” Mr. Schmitt says in a statement. “This is a win for the advisors, a win for their dealers and, ultimately, a win for their investing clients.”

Mr. Schmitt says NEO Connect’s expansion to the mutual fund dealer community “opens up access to advisors administrating a significant amount of investible assets who can now consider investment opportunities in NEO Connect-distributed funds.”

Other investments products are expected to be added to the NEO Connect platform down the road. Although Mr. Schmitt wouldn’t elaborate in an interview on what might be next, he says that “there are many other [assets] I think can be supported and we can distribute with the platform. … This is the beginning of much more.”

The attraction of PTFs is their management fees, which are lower than those of traditional mutual funds. That’s because PTFs transact and settle similar to ETFs, for which orders can be placed through an equities trading platform using a ticker symbol. However, unlike ETFs, PTFs have no minimum investment requirements and orders are filled at end-of-day net asset value. This provides investors with better pricing by avoiding bid-ask spreads.

By integrating NEO Connect into Univeris’ wealth-management platform, the two companies say Peak’s mutual fund-licensed advisors will receive the same advantages as their IIROC-licensed counterparts that come with accessing PTFs distributed on NEO Connect.

Specifically, they say the new platform offers added efficiencies that allow asset managers to set lower management fees on their products. Transacting PTFs can also save advisors from having to perform certain trading tasks, which means more time to focus on adding value to their clients’ portfolio, Mr. Schmitt says.

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Peak is expected to be the first of a growing number of firms to offer MFDA-licensed advisors access to PTFs distributed on NEO Connect. In fact, NEO Connect says it currently distributes close to 70 PTFs from seven investment fund providers, including prospectus-based mutual funds and offering memorandum funds.

Carmine Tullio, president and CEO at Univeris, says enabling MFDA-licensed advisors to access PTFs will help them add value to their client relationships, which is critical in today’s competitive landscape.

“This is in response to that,” he says. “[It] enables us to provide more to the end consumer. … Our job is to provide as many trading options as possible to our customers. This is another option.”

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