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Selling mutual funds in Canada is a very lucrative business if you do it on a massive scale.

That’s one of the reasons why three big banks have decided that their in-house financial planners will no longer sell funds from outside firms. Only in-house funds will be offered, which means some of the country’s largest investment funds will only get bigger.

Bank funds range all over the map in performance – there’s good, there’s bad and there’s ugly. Got some of the good ones? Then consider a better way to hold them than through a bank planner who acts primarily as a seller of fund products. Open an account at your bank’s online brokerage division and invest in the Series D version of your funds.

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The Ontario Securities Commission has contacted Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank for more information about their plans to stop selling funds from outside firms. Regardless of which way this story ends, Series D funds are worth a look.

Bank planners sell the Series A version of funds, with a full trailing commission built into the fees that are taken off the top of fund returns (net returns are publicly reported). Trailers compensate advisers and their firms for services provided to clients. Series D funds have a much-reduced trailer built in to reflect the fact that they’re designed exclusively for the do-it-yourself crowd.

RBC Canadian Dividend Series D has a trailing commission of 0.25 per cent, while the Series A version sold by planners and branch staff has a trailer of 1 per cent. The difference in returns is a window on why fees matter in investing. The Series D version has a 10-year annualized return to July 31 of 8.6 per cent, compared with 7.9 per cent for the Series A version. RBC’s own website shows that, on $10,000 invested, you’d have made an extra $1,400 or so with the Series D version over the past 10 years.

You don’t get advice and planning with the Series D version. If you have a great planner at the bank who has worked with you to set and achieve your financial goals, then a more expensive Series A fund can still be a good value. You give up returns, but gain a lot through planning.

If you have a planner who acts mainly as a fund seller, then you’re not getting your money’s worth from a Series A fund. Switch to Series D and buy yourself a consultation with an unbiased independent financial planner.

In a non-registered account, Series A funds can be switched into Series D in an online brokerage account without tax implications. The buy and sell order to initiate the switch must be the same dollar amounts, have the same transaction date and the same account number.

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