My recent column on TFSA fees has really opened some eyes.
The column prompted several readers to look at the bank and investment account statements to see whether they've been charged annual administration or account transfer fees on tax-free savings accounts. Some found they have been dinged for these costs, but that wasn't the biggest attention-grabber. For three readers in particular, this distinction went to the 1 per cent account fees they're paying on their TFSAs. Their question to me: Is that normal?
Before I answer this question, let's reflect on the importance of knowing all the investment fees you're paying. You need this information to judge the value you're getting from your adviser and investment firm, and there are other benefits as well. Investment firms make mistakes with fees sometimes and will reverse them when noticed. Fees may also be negotiable. Or, you may be able to duck them by pooling accounts with the same firm. With stocks falling, it's no fun looking at your recent investment account statements these days. Do it anyway so that you know what you're paying.
As to that 1 per cent fee, it's normal for accounts that are being run by fee-based advisers and are invested in various types of stocks, ETFs or mutual funds. Use my investment fee comparison tool and you'll find it's actually quite fair to pay that percentage of your assets in exchange for investment management and financial planning. These fees apply to all types of investment accounts, TFSAs, RRSPs, RRIFs and cash accounts.
Here's a fee checklist to use when looking at your investment accounts:
1.) Advice fees: You either pay a percentage of the assets in your account, or you pay through trailing commissions buried in the fees mutual fund companies take off the top of their fund returns (net returns are reported to investors); some advisers are still compensated through commissions on stock and bond trades, but the number is declining
2.) Annual admin fees: May apply to your registered accounts
3.) Low balance or account inactivity fees: Online brokers use these to discourage small accounts
4.) Withdrawal fees: May apply to money taken out of registered accounts
5.) Statement fees: Some online brokers now charge for a paper statement – they want you to access these documents online.
We can justifiably criticize the investment industry for being cagey with fees, but investors have a responsibility to know their costs. Start checking your recent account statements to see what you're paying. If you have questions about anything you see, I'm here to help at rcarrick@globeandmail.com.
Rob Carrick