Investment Fees - Understanding What you Pay and Why it Matters

February 14, 2019 | Thomas De Mello


You can’t control the markets. But you can often control what you pay to invest, and that can make an enormous difference over time.

You can’t control the markets. But you can often control what you pay to invest, and that can make an enormous difference over time.


As someone who reviews and analyzes dozens of portfolios every week, the true cost of what you pay for your investments can often be difficult to find, confusing to understand, and disappointing to your returns. While fees are not everything, you want to ensure that you are receiving good value for the cost that you pay - this includes investment returns, financial planning, client service and professional advice.   





According to Morningstar, the average cost of mutual fund investing in Canada is 2.2%—assuming a 6% market return, this means that fees can eat up nearly 36% of your annual investment returns. On a more conservative portfolio, investment fees could reduce returns by nearly 45%!



Account structure, investment product type and asset allocation can all make a difference in the fee you pay. It's important that you understand what you are invested in and the fees associated with your current portfolio, including any embedded fees which can often be overlooked by clients. 


Investment Options: 


Mutual funds can offer convenience, diversification and professional money management; they can also be one of the more expensive investment options for retail clients. 


Exchange Traded Funds (ETF), have evolved greatly over the years and now offer many of the same benefits of mutual funds but at a fraction of the cost. 


Individual Stocks and Bonds can provide greater control of your investments and increased transparency at a low relative cost. 



Account Structure:  


Commission Accounts charge a fee per transaction and are typically ideal for low-turnover, long term buy and hold positions. Due to the transaction costs involved with each trade, this account structure can sometimes discourage a client or advisor from making an otherwise favorable transaction in the portfolio. 

Fee Based Accounts charge an annual management fee based on the percentage of assets actively invested. This fee generally ranges from 1% to 2% depending on the size of the account. There is no additional charge for any trades or transactions. This account structure better aligns the interest of the client and advisor as both will benefit from increasing returns. 


As you can see, there are a number of factors that can affect the fee you pay for your investments. Contact us now to learn more about investment fees or to request a complimentary portfolio review - this review not only provides a full breakdown of the current fees you pay, but will also analyze your current risk exposure, investment returns and portfolio holdings. 


Whats included in your fee with RBC Dominion Securities?  Click here to view a summary of our services and solutions that are included in your relationship with us.