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How to Find Out the Fees You're Paying (Without Having to Ask Your Advisor)

 

Talking about money can be an uncomfortable topic. It’s likely one of the reasons why money management fees are one of the biggest things investors are rarely aware of. Yet it’s important to know because the fees you’re paying to have your money managed impact your investments’ net performance.

 

In Canada, money management fee transparency has become a popular topic in the news, and for good reason. A 2016 Justwealth Financial survey found that nearly two-thirds of Canadian respondents don’t know how much they pay in annual investment fees. And you may not know this, but many Canadians are still heavily invested in mutual funds where management fees are among the highest compared to other countries. But even if you don’t pay much attention and are comfortable with your investment returns, you could potentially be able to pay lower fees.

Why Investment Fees are Confusing

Currently in Canada, authority bodies are trying to bring more transparency into management fees charged by mutual fund companies to individual investors. Why? Because it’s confusing for investors, and it’s difficult to find out what they’re paying.

 

Mutual fund fees are embedded into a Management Expense Ratio (MER), which is the total of the operating fees and management fees. The MER isn’t always plain and simple since many investors aren’t sure what they’re paying for advice (coming from their advisors) and what goes to manage the money (investment management fees). It’s important to know the MER, as it serves as a broad measure of how pricey a fund is to an investor.

Let’s take three examples of MER.

·    Sentry Investments: Fund: Sentry Canadian Income Class: Management Expense Ratio (MER.): 2.36%, which often includes the trailer fee (up to 1%) paid to the advisor.

·    Scotia Bank: Fund: Scotia Global Dividend: Management Expense Ratio (MER.): 2.33% and Scotia Bank can sell those mutual funds into their own branches.

·    GWL: Fund: Great West Life Corporate Bond (100/100): Management Expense Ratio (MER.): 2.53%, which often includes the trailer fee (up to 1%) paid to the advisor.

 

According to Investment Funds Institute of Canada (IFIC), the average total cost of ownership of mutual funds for clients using advice-based distribution channels in Canada was 2.2% at the end of 2014. That’s no small percentage. It’s important to look closely at your fees because they could be an impediment to achieve your long-term financial goals.

Finding Out the Fees You’re Paying

Despite confusion or uncertainty regarding investment costs, many investors don’t want to ask their current advisor what they’re paying nor do they want to fight over the phone about fees. Unfortunately, if you don’t know what you’re paying your advisor or how to find out the MER it’s difficult to know if you are paying more than you need to for investments that align with your financial goals.

 

One way you can find out what fees you’re paying without an uncomfortable conversation with your advisor is to speak with another independent party—an independent Wealth Manager who does not sell mutual funds or bank financial products who can confidentially review your financial statements and portfolio and provide objective feedback or a second opinion as to what you’re paying and how you may be able to lower them. Think of it this way: If you are asking someone who is a seller of mutual funds if you really need a mutual fund, you might as well be asking your barber if you need a haircut. There are plenty of other, less expensive investment products.

 

This is where I can help. I believe it’s imperative for investors to know how much they’re paying in investment fees and how it impacts their wallet. I’m offering any investor an opportunity to find out their fees with a complimentary investment fee review, no strings attached. During our meeting, I’ll review your financial statements and investment lineup, learn more about your financial goals and circumstances, and help you find out what fees you’re being charged, how much service you should be getting for these costs, and what your options are.

 

To get started, call my office at 877-292-0009 or book a 30-minute virtual meeting now

 

About Carl

Carl Martel is the president and portfolio manager of Montag Private Wealth. Along with more than 15 years of capital market experience and 10 years of experience in real estate hard assets, he is a Chartered Investment Manager® and hold a Certificate in Derivatives Market Strategies from CSI Global Education, a Masters of Science from Laval University, and an MBA from l’Université du Québec à Montréal. A focused and pragmatic, results-oriented investment professional and entrepreneur, he specializes in serving the unique financial needs of high net-worth individuals and families, foundations and endowment funds, and business owners. To learn more, visit http://montagprivatewealth.com/ or connect with Carl on LinkedIn.