In addition to the main financial advisor fees highlighted above, there are various other fees that you may have to pay to cover the cost of various transactions in your account as well as general account management and maintenance.
Mutual Fund Fees
If you investment portfolio contains mutual funds, you will – as a shareholder of that fund – have to pay mutual fund fees. Mutual fund fees usually range between 0.5% and 1% of the assets under management. You can usually find a detailed breakdown of the fees a mutual fund charges in its prospectus.
Exchange Traded Funds (ETF) Fees
ETFs track an index, a basket of securities, currencies, bonds, or a commodity. Unlike mutual funds, they have a higher daily liquidity and are subject to price changes throughout the trading day. They also typically have lower fees than mutual funds – averaging around 0.5% of assets – making them a highly attractive investment vehicle.
These fees are usually paid directly to your financial advisor whenever they buy or sell an investment for you. Some brokerages charge annual fees, some don’t, so make sure you ask. More specifically, ask if they charge for managing your account. If they do it should be in the US$50 to US$75 per year range.
Other brokerage fees may include inactivity fees, US$50 to US$200 per year, research and data subscriptions, US$1 to US$30 per month, trading platform fees, US$50 to US$200 per month, paper statement fees, US$1 to US$2 per statement, and account closing or transfer fees, US$50 to US$75.
All of the above fees form part of the management expense ratio, or MER. Your financial advisor may tell you that as an investor you don’t have to pay the MER, and that it’s an expense that the institution actually pays on your behalf. This is not true. Although all institutions pay the MER out of their own assets, in order to recoup that particular fee, they reduce the return that you would have received from that actual investment. It’s a somewhat sneaky practice, but totally legal.