In fee-based investment accounts, advisors and the investment or mutual fund dealers they work for will typically charge an account fee for advice, access and service directly to the investor. This fee is usually disclosed and arranged up front, and is often based on the assets in your account.
Fee-based mutual funds (series F units)
When an investor buys a mutual fund in a fee-based account they will purchase series F units of the fund. Series F units are only available in fee-based accounts as they do not include a trailing commission as a component of their MER. As a result, series F units will have lower MERs than other series of the same fund which do include a trailing commission as part of their MER, such as series A units.
Account fees and trailing commissions are both fees for the advice, access and services provided to an investor.
For fee-based investors, account fees are charged directly to the investor by their investment advisor and the investment or mutual fund dealer they work for.
On the other hand, trailing commissions are embedded in the MER of a mutual fund. As the mutual fund manager collects this commission, they pay the mutual fund dealer and your advisor.
Transparency of fees and costsCosts are visible and reported to investors so they can compare mutual fund performance across funds as only the investment management fee, operating expenses and taxes are embedded.
Personalized pricingAs the account fee is typically tiered based on an investor’s account size, fee-based accounts recognize larger relationships with lower pricing.
Fee groupingMany fee-based accounts allow investors to group assets across members of a household or family, leading to further fee reductions.
For more information about the costs of investing in mutual funds, please speak with your advisor.