An f-series or f-class mutual fund is a mutual fund that does not pay any additional commissions to the firm or advisor making the purchase. It is designed specifically for accounts that pay a percentage based on your overall dollars managed by an advisor. This is typically referred to as a fee-based model. Therefore, an f-series fund Management Expense Ratio (MER) only includes the costs of that management team to manage, trade and administer that fund.

 

Let’s look at an example:

ABC Global Balanced Fund f-series.

You have an RSP account valued at $200,000. Of that, $50,000 is invested in ABC Global Balanced Fund. MER for said fund is 1%. Therefore, your weighted cost to own that fund is 0.25% ($50,000/$200,000 * 1%).

If you have 3 other mutual funds, all $50,000 each, with the same MER, you total weighted MER is 1%. Add this to your cost of advice, financial planning and overall wealth management you are paying to the firm, equals your total cost.

 

The one thing about f-series mutual funds and their cost is you don’t see it in an obvious way. You see it in the return.

For example, ABC Global Balanced Fund returned 8% last year versus DEF Global Balanced Fund returned 7%. DEF might have higher fees, or might be invested or allocated in completely different sectors or geographic areas which explain the difference in returns.

 

Ultimately, the cost of an f-series mutual fund is just one aspect to be examined in deciding where to invest your money. It is important to consider how that money is invested inside the mutual fund, does it support your end goals, meet your income and financial planning needs, have a buy and sell process, and have scale, breadth and depth in the management team. There are many factors to consider when choosing an investment and working with an advisor will help in those decisions.