Planner: This is what an investment costs you

The inside track on how financial advisors are paid.

June 17, 2014 | Last updated on June 17, 2014

3 min read

Ever wonder how much financial advisors get paid? It depends on what you invest in. Here’s a breakdown.

Mutual funds	1. Sales chargesone of:a. Front-end sales charge b. Deferred sales charge c. Low-load sales charge d. None For a, b and c, the fund provider pays the dealer a percentage of what you invest (in scenario a, you and your advisor determine the rate; in b, it’s usually 5%; and 2.5% in c).	2. Fund expenses* X% management expense ratio X% trading expense ratio Part of the MER goes toward a trailing commission for your advisor. If you own F-class funds, that trailer is eliminated and the advisor negotiates a fee directly with you, which may be tax deductible	3. Other fees Short-term trading fee (if you redeem or switch within 30 days of purchase) Switch fee
Stocks & bonds	Option A flat fee on total assets	Option B asset-class fee (usually equities cost more to trade than fixed income)	Option C transaction fee per trade (the larger the trade, often the lower the fee)
ETFs	1. Fund expenses* X% management expense ratio If you own advisor-class ETFs (denoted with .A after ticker), part of that fee goes toward a trailing commission for your advisor.	2. Other fees Trading and a small bid-ask spread If you sell one ETF to buy another from the same family, trading costs may apply. For large orders, some providers will do in-kind transfers at reduced costs.
*These are not paid directly. They reduce the fund’s return.
Other ways advisors get paid National Instrument 81–105 prevents IIROC and MFDA advisors from receiving sales incentives from fund wholesalers. Advisors may receive incentives for attracting higher levels of assets under management.

Commission

Typical first-year insurance commission rates

Typical first-year insurance commission rates