How to determine your investment fees


    A. Client Relationship Model 2 (CRM2) went into effect in 2017 with the aim of increasing fee disclosure and transparency for Canadian investors. Unfortunately, John, there are many people like you who are still unsure of their fees. Worse, I’ve seen some advisor the fees paid by investors are vague, even when asked directly.

    Currently, most investment dealers and advisers are required by regulators to disclose at least once a year the annual dollar amount of fees paid for services and advice. Typically, this disclosure is either part of a financial statement or a separate report on fees and compensations, a fee report, or similar document. Disclosures can be made by mail or online, depending on your investment firm’s shipping method.

    The fees disclosed include subsequent commissions paid by mutual fund companies to advisors and firms, as well as transaction fees for buying and selling securities such as mutual funds, stocks, bonds or exchange-traded funds.

    Some firms charge an administration fee, either in addition to or in lieu of follow-up commissions or transaction fees.

    There may also be operational costs such as annual management fees that are common with registered accounts such as RRSPs.

    One of the problems with CRM2 is that the fees disclosed may only tell part of the story. Mutual funds, exchange traded funds (ETFs) and some other products incur fees that do not have to be disclosed to investors.

    Mutual funds have a management fee that is deducted from the funds each year. Most mutual funds used by investment advisors, however, have two tiers of fees and this is a major failure of the financial industry to tell consumers only half the story. The subsequent commissions that must be disclosed to investors annually are usually between 0.5% and 1%. However, the all-in fees that investors should be concerned about averages around 2%, but are typically between 1% and 3%.

    For example, if you invest with a robo-advisor, there are management fees of around 0.5%. The underlying ETFs also have their own fees that can add another 0.25%.


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