Your MER is about to go up.
Index provider, MSCI, is starting to charge for its oligopoly-like index services. And increased fees always get passed on down to Individual investors.
Index service provider MSCI, along with Standard and Poors and FTSE, are the major index services providers. Think MSCI Europe Australasia Far East (EAFE), S&P 500, S&P/TSX 60 and FTSE 100. Indexes provide hundreds of benchmarks by which end-users and investors of all kinds can measure investment performance and exposures to asset classes, geographies, regions, currencies, sectors and industries.
And now, users are going to pay for it.
MSCI will begin charging for previously free services or charging more for existing pay-for-services. All Institutional index users are impacted; from Pension Plans to boutique Hedge funds and, yes, Exchange Traded Fund (ETF) providers like iShares, Vanguard, Bank of Montreal (BMO) and the rest.
It will be interesting to see how this impacts the MSCI.com index information now available for free. The bigger question for Individual investors will be how this impacts ETF (and mutual fund) manufacturers who now use MSCI indexes. Individual investors can bet that incremental fees will get passed on down and show up in administrative expenses hidden under the MER umbrella.
With MSCI now charging for previously free services (or charging more), can S&P and FTSE be far behind?
_____________________________________________________________________________________Next time? More Risk Management. Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan