If you’ve ever opened your quarterly investment account statement, looked at your bottom line and wondered why you didn’t make a big profit despite market gains then you mostly have experience with investment fees.

No worries, it happens to the best of us.

I was expecting to see a relatively decent profit gain during the last quarter, but whenopened my investment portfolio account statement I was shocked to see that my net gains weren’t as great as my expectations.  It wasn’t that the market didn’t perform well, it was due to the fees and management expenses.

This is why it’s so important to research your investment options before making any decisions and understand all fees involved before adding any new investments into your portfolio.


What types of fees and expenses do investments have?

Trailer fees
These fees are also commonly known as Deferred Sales Charges or DSCs.  It’s a percentage of your entire investment that is charged upon withdrawal on the gross dollar amount withdrawn.  The fee normally lowers as the years pass by and completely dissolve over a predetermined time period, commonlyseven years.

The management expense ratio
This type of expense is commonly known as an MER.  It’s a fee that’s charged to actively maintain a mutual fund, exchange traded fund or other type of investment.  It includes costs such as the fund manager’s salary and administration costs.

The MER can be found on the fund information sheets and it is taken off of the entire value of all assets under management of the investment i.e. 1.5% of $500,000,000 of the pooled funds.  Individual investors will never see this expense on a statement because it is taken out of the overall investment gains prior to the individual fund performance being published.

Financial planning service fees
There are two types of financial planners: fee-only and commission-based.  Fee-only financial planners charge a percentage to their clients for managing their investment portfolios and providing ongoing advice.  They pride themselves on being unbiased when it comes to their recommendations because they’re not influenced by product commissions.

Commission-based financial planners do not charge their clients directly because they receive a fee from the company whose investments they sell.  On one hand this is great for clients because there are absolutely no fees charged for professional financial planning services.  On the other hand you need to ask yourself if your financial planner really has your best interest at heart if they are being persuaded by high commission fees.

Discount broker fee
This is what I like to call a transaction fee.  When you manage your own investment portfolio through a discount broker – commonly known as an online brokerage – you’re not paying a fee for financial advice…because there is no advice.  However you are charged a fee per transaction.  It’s usually a flat fee i.e. $9.95 per trade, but it can also be a percentage of your total purchase.  4

It’s important to read the fine print when it comes to buying and selling investments to ensure you aren’t hurting your bottom line in the process.



What to do about your investment portfolio fees?
After reading all that information I’m sure you’re asking yourself  “How can I cut down on my fees?”  The easy answer is to research your options before buying any investments.  If you know the fees and expenses involved you can find an alternative (and comparable) investment with a lower fee.

That can mean buying an ETF over a mutual fund, adding a passively managed index fund to your investment portfolio or buying a dividend fund from one company over another as fees vary among investment providers.

You can also get digital when it comes to your investment portfolio.

A new app called DRAFT will come in handy when it comes to lowering your investment portfolio fees.

It helps you see where others are winning in the investment game with lower expenses and how they compare to your own portfolio in various aspects such as performance, fees and expenses.

If you want to know whether you’re getting your money’s worth when it comes to fees and compare your investment portfolio rates of return to others then you need to download DRAFT.

Come on over and Get Drafted Today!