Skip to main content

Part 6: Understanding investment fees

Investing comes at a cost and that can affect how your portfolio performs. In our final segment, you’ll learn about the various fees at both the account and investment level.

What kinds of fees do you pay when you invest? Understanding fees at the account level is important because fees can directly impact the performance of your portfolio and your ability to save toward your goals.

  • Robo-advisor portfolios are typically lower cost because they use online platforms and questionnaires to determine the appropriate investment portfolio for you.
  • If you prefer to work directly with a professional who will provide advice and recommendations, an advisor-led service is recommended. Naturally, costs will be relatively higher for this choice.

At the investment level, there are costs associated with professionally managed funds that you may own, typically known as the management expense ratio or MER. It’s important to us at MD Financial Management that you’re comfortable with the fees you pay and that you understand the financial planning services they enable.

For more information about fees or help reviewing your portfolio, get in touch with an MD Advisor*. They will be happy to answer any questions and to tell you more.

PREVIOUS: Part 5 – How to evaluate your investmentsComplete the course

Keep on reading...

Investing is easy—until it's not: The benefits of a real-life advisor What type of investor are you? Not all digital investing platforms are made equal  Meeting with an MD Advisor: What to expect 

You probably spend money just about every day, whether it’s at the grocery store, buying coffee, lunch or even buying a new car or house.

When you shop, you probably check the price before you head to the cash register or click buy.

Investment management and services are also things that you pay for - after all, a lot of expertise and hard work goes into helping you make the right decisions so that you can achieve your financial goals. You pay for things like investment management and guidance on financial planning, insurance, estates and trusts, banking and borrowing, and incorporation.

However, when it comes to investments, the price tag isn’t as obvious.

Understanding investment fees is important because it can directly impact the performance of your portfolio and your ability to save towards your goals. For example, if you’re paying higher fees than necessary, it will eat away at your returns and take you longer to reach your goals. It could also mean you’re taking on additional risks.

So what kind of fees do you pay?

There are a few investment costs you need to understand.

Account level costs vary depending on how much service you decide you will need. Depending on how you prefer to handle your investments and how involved in the day-to-day management you decide to be, the costs will differ.

Let’s start at the most basic level:

A do-it-yourself or online self-directed approach will typically cost less because it doesn’t come with investment advice, financial planning or any help with transactions. You will need to research, select, buy and sell your own investments and costs are typically associated with transactions. 

Robo-advisor portfolios are typically lower cost because they use online platforms and questionnaires to determine the appropriate investment portfolio for you to achieve your goals. While your portfolio is professionally managed, you won’t be getting other planning services like tax minimization and advice beyond investing. Fees are typically expressed as an annual percentage of your assets.

If you prefer to work directly with a professional who will provide advice and recommendations, an advisor-led service is recommended. You’ll build a valuable, ongoing relationship and benefit from personalized investment advice and comprehensive financial planning. Naturally costs will be relatively higher. Fees are also typically expressed as an annual percentage of your assets.

And finally, at the top end of the service spectrum, fully discretionary, personalized investment management. Spend less time managing your money, so you can focus on personal or professional goals. This service allows you to delegate investment decisions to an experienced MD Private Investment Counsel Portfolio Manager dedicated to helping you establish and meet your goals. 

At the investment level, there are costs associated with professionally managed funds that you may own. Mutual fund and exchange traded fund costs are typically expressed as the management expense ratio, also known as the MER. This covers the hard work the fund managers do in the background to ensure the funds achieve their objectives, so that in turn you can use them to achieve your financial goals. It also includes various operating expenses, administration items and taxes. MERs are typically expressed as an annual percentage of your assets invested. For example, a $1,000 investment in a mutual fund with an MER of 2.5% would cost you $25 per year to own.    

At MD, your Fees and Compensation Report explains the fees you paid in the past year for the investments in your account.

And your Investment Performance Report tells you how your investments have performed since December 31 of the previous year, after costs have been deducted.

That way, you are always aware of the fees are you paying and your personal rate of return

Maintaining fee value and providing complete transparency to you is a major commitment for MD Financial Management. Part of this commitment involves providing products and services with fees that are competitive and easy to understand.

So that you can select the right level of services that fit your needs, we’ve designed the MD Financial Suite to provide multiple ways for you to work with MD. It’s important to us that you are comfortable with the fees you pay and that you understand the financial planning services they enable.

Sacrificing quality to offer rock-bottom costs is not our goal. Instead we strive to deliver maximum value to you. That said, we are proud that our management expense ratios (MERs) are, on average, 49% (Series F), 29% (Series A) and 11% (Series D) lower than industry averages.1

For more information about fees or help reviewing your portfolio, get in touch with an MD Advisor. He or she will be happy to answer any questions and tell you more.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.