Fees, fees, fees! What are investors paying for investment management services in Canada? (2024)

FAQs

What are the fees for investment management? ›

‍Advisor (Management) Fees

The industry typically refers to this as an investment management fee and averages between 1-2% of assets (i.e. A $100,000 investment could cost you between $1,000 - $2,000 annually).

This usually averages around 2.4% of your investment for the initial advice and set-up, followed by around a 1% annual fee for ongoing advice and management.

Investment fees are fees charged to use financial products, such as broker fees, trading fees, and expense ratios. Investment fees are one of the most important determinants of investment performance and are something on which every investor should focus. Over time, minimizing fees tends to maximize performance.

Fees in a registered account

Advisory and other investment fees charged on registered assets, regardless of the investments held, are not tax deductible. However, you have the option to pay the investment fees charged on a registered account from the registered account itself or from outside the account.

The standard commission for full-service brokers today is between 1% to 2% of a client's managed assets. For example, Tim wants to purchase 100 shares of Company A at $40 per share.

It typically ranges from 0.25% to 1.5% of the value of your investment each year. It is to pay for the services and advice the advisor and their firm provide to you. The firm may pay all or part of the commission to your financial advisor.

Without knowing the full scope of services delivered by the advisor, 2% may be too expensive for a portfolio of your size and for a relationship in which tax advice is not provided. This immediate, high-level evaluation is based on benchmarks for typical advisory fees, which we'll dive into shortly.

But, if you're already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they've helped you accomplish. For example, if they've consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain.

Are you paying too much to your financial adviser? Many financial advisers charge based on how much money they manage on your behalf, and 1% of your total assets under management is a pretty standard fee. But psst: If you have over $1 million, a flat fee might make a lot more financial sense for you, pros say.

What does Edward Jones charge to manage accounts? ›

Edward Jones invests and manages your account. Annual Program Fee of 1.35%, with lower tiers and reduced rates for higher asset levels. Annual Portfolio Strategy Fee of 0.09% or 0.19% depending on account type, with lower tiers and reduced rates for higher asset levels.

Investment fees aren't all bad. They cover some important costs to help ensure that your investments are managed well. You just want to make sure you're getting good value from your investments without letting excessive fees cut into your returns. You should never invest in anything until you understand how it works.

Different fees for different services

According to AdvisoryHQ, for a $1,000,000 portfolio, the average financial advisor fee is 1.02% per year. This means that you would pay $10,200 per year in advisory fees on that $1,000,000 portfolio. As your assets get bigger, this fee drops.

A simple management fee is applied as a percentage of the total assets under management. Suppose you're planning to invest $100,000, and an investment firm offers you an investment opportunity with a management fee of 0.45% per year. In this case, you would be charged $450 a year in management fees.

In the pre-investment due diligence phase, management fees represent the largest estimable cost. [1] Therefore, they are an excellent candidate for negotiation.

A management fee is a charge levied by an investment manager for overseeing an investment fund. The fee is intended to compensate managers for their time and expertise in selecting stocks and managing the portfolio.

Your adviser's fees will be based on many things: what advice you need, how much time it will take, and the size of the assets involved. Advisers often charge between 1% and 2% of the asset in question (e.g. a pension pot), with lower percentages being charged for larger assets.