B Charges and fees
The fees that you pay to your firm for the advice and services it provides you also have an impact on the overall performance of your account.
When you pay a fee, you’re paying for the various services that your firm provides, which can be different depending on your firm or the type of account that you have. This includes things like providing advice or a review of your financial goals, determining your risk profile, assisting you with building your financial plan, trading securities on your behalf and providing you with statements about your account.
Not only do you reduce your account’s performance by paying fees, you also miss out on the compounding power that the extra money would have made.
However, fees can add up considerably over time, and even a fraction of a percentage can have a significant impact on the long-term value of your account. Not only do you reduce your account’s performance by paying fees, you also miss out on the compounding power that the extra money would have made.
The new report on charges and fees breaks down the fees that you’ve paid over the past year to maintain your account and make trades. It also shows incentives that are paid to your firm by others, such as trailing commissions or referral fees. This report will be sent along with your account performance report so that you can consider the value of the advice and services that your firm has provided.
With this new report, your firm is required to itemize the cost of everything from embedded trailer-fees to redemption fees, commissions, switching fees and RRSP administration fees, as well as provide you with a dollar figure of the total amount that you paid in fees over the past year.
Keep in mind that the report on charges and fees is not a breakdown of your advisor’s personal compensation, but rather the compensation that has been paid to the firm.
The report on fees is also not a report on the cost of the investment products that you own, but rather the cost of the advice provided to you by your firm. Fees that are charged within an investment fund, such as management fees, are not included as operating charges in your report.
If the manufacturer of a mutual fund (or similar product) that you’re holding in your account is taking a fee directly out of the fund’s earnings, you’ll find that listed in the Fund Facts (or other disclosure documents) that the manufacturer provides, under the product’s “management expense ratio.”
To find out more about the fees that are applied to the actual investments that you own, you should speak to your firm or check the product’s disclosure documents, such as Fund Facts for mutual funds. Reading the product disclosure alongside the new report on charges and fees should give you a comprehensive look at the total cost of your investments.