Understanding fees

By: Sound Choices • October 25, 2017 • Personal Finance

There are many reasons to work with a financial advisor. Maybe you want to invest in financial markets, but lack the time and expertise to properly build and monitor a portfolio of investments, 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. Understanding the fees that may be associated with financial advice can be confusing, but here are three of the most common ways a financial advisor can be compensated for the valuable services they provide.


If you invest in mutual funds, the company that manages your funds may pay a commission to the company (i.e., the dealership) where your financial advisor works. Your financial advisor then receives a portion of that commission. Mutual fund commissions are typically categorized as front-end fees, deferred sales charges (DSCs) and/or trailer fees.

As the name suggests, front-end fees are paid upon purchase – by the fund company to the dealership – and taken from the initial amount you invest. DSCs are paid by the fund company directly to the dealership, but not taken from the amount you invest. DSCs are set up to encourage you to stay invested in your funds over the longer term, which is often the best way to build wealth. If you redeem some or all of your investments before a specified time period, you will pay the fund company a DSC – which is a percentage of your savings – upon redemption.

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.


Many financial advisors do not operate under a commission model. Rather, they charge an annual fee and then provide you with advice and service, execute on trading activity for your investment portfolio and refer you to other specialists (e.g., tax and estate planners, accountants, lawyers) as required. The fee you pay is expressed as a percentage of the assets being managed for you and typically ranges from 0.75% to 1.50% of your portfolio’s value.

Some financial advisors choose to receive compensation through a blend of fees and commissions. For example, they may charge a flat fee for a basic financial plan and then earn a commission when they execute investment-related trades.


Instead of being commission-based or fee-based, financial advisors may receive an annual salary from their company. Typically, this type of financial advisor works at a bank or credit union that sells a range of investment products, whether offered by the company or a third party. On top of their salary, these financial advisors may earn bonuses based on the amount of assets they bring into the company or based on other criteria that have been set out by the company as an incentive for financial advisors to grow their business.

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

The contents are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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

Our website uses cookies to help you get the best experience. Please Accept or click Edit to control your settings.