Understanding Fees

Brought to you by Sound Choices - AGF Education for Investors and Advisors

There are many reasons to work with a financial advisor. Maybe you want to invest in financial markets, but a lack of time and the expertise to properly build and monitor a portfolio of investments is holding you back. Or you could be preparing for retirement and need some guidance to reach your goals. Whatever your reason, your financial advisor can help you get on the right track to achieve your financial objectives. 

While your financial advisor can explain the fees associated with their services as well as those associated with the investments in your financial plan, here’s an overview of some of the most common fees. 

The Asset Management Company

1. Management Fees – Fees for portfolio management services provided, including:

• Researching, choosing, monitoring and selling investments that reflect the product’s investment strategy
• Rebalancing the portfolio for optimal asset mix
• Managing risk for the portfolio (including sector allocation, currency management)
• Considering tax efficiency

2. Operating Expenses – Administrative expenses relating to the operation of the investment fund, such as:

• Maintaining records for the fund and its investors
• Arranging for custodial services for the fund’s assets
• Providing accounting services, including calculating the fund’s value – and its unit pricing as well as tax reporting
• Ensuring the fund meets its regulatory requirements, including required audits, financial reports, regulatory filings

Your Financial Advisor / Their Company

Here are some of the ways a financial advisor can be compensated for the valuable services they provide:

1. Commission-based – the advisor is paid for transactions they do on your behalf, such as a fund purchase.

2. Fee-based – the advisor charges an annual fee based on the assets they manage for you.

3. Blend of fees and commissions – For example, the advisor may charge a flat fee for a basic financial plan and then earn a commission when they execute investment-related trades.

4. Salary – on top of an annual salary from their company, an advisor may earn bonuses based on criteria set out by the company as an incentive for financial advisors to grow their business.

In addition, fund companies often pay trailer fees to your financial advisor’s dealership, of which some goes to your financial advisor for the ongoing service and advice they provide. 

One of the ways you can learn more about mutual fund fees is to look at the fund’s simplified prospectus or Fund Facts document. These are all available at www.SEDAR.com.

If you have questions about how your advisor is compensated, make sure to ask your financial advisor – they are focused on providing the information you need and are committed to helping you reach your financial goals.