Securities regulators have published a brochure that should help investors understand how their investment advisors are paid as they contribute to their RRSPs this winter.
Doug Hyndman, Chair of the Canadian Securities Administrators (CSA) says there are different types of securities dealers and advisors, each with their own type of fee structure.
Investors should remember that the fees they pay for investment services depend on whom they invest with, what they invest in, what their portfolio is made up of, and how they invest.
According to the CSA, a Full Service Dealer may charge:
- a commission of 1% to 3% of the trade value to make an equity trade;
- flat advisory fees;
- fees based on a percentage of your portfolio;or
- a fixed fee, which allows a certain number of free trades.
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Regulators advise that most discount brokerages charge a flat fee between $25 and $43 to execute equity trades of less than 1,000 shares, then add on a percentage or per share fee for larger purchases.
The CSA also outlined the major types of fees associated with mutual funds. Management expenses are paid to the mutual fund company, not the dealer, and pay for management, marketing and administrative costs.
Sales fees are used to compensate mutual fund salespeople, including front-load commissions and deferred sales charges.
Service fees, often called “trailers,” are based on the value of each mutual fund you hold, usually 1% or less per year.
Other fees include transfer fees, processing fees, set-up fees and operating fees.
For additional information on mutual funds and fees, refer to the CSA brochure Mutual Funds on the CSA web site (www.csa-acvm.ca), or visit the Investment Funds Institute of Canada’s web site (www.ific.ca).