MERs: What It Costs You To Invest In Mutual Funds

What does MER mean?

The advisor’s fees : This is primarily how your advisor receives their compensation. Also known as ‘Trailer Fees,’ this includes the services they provide to the fund’s unit holders, including advice; on-going account monitoring; financial planning work; and all other services provided to you by your advisor. This fee can range from of 0.25% (cash investments) to 1.25% (certain equity funds) depending on the type of mutual fund in question.

The fund company’s fees: Investment management: This is the cost of managing the portfolio including securities research, analysis and selection, investment strategy, and portfolio management. Administrative & operating Expenses: The costs associated with operating the fund including: 

 

  • Transfer agency, fund pricing and bookkeeping (including the processing of transactions and the calculation of the fund’s unit price). 
  • Preparing and submitting financial statements and other regulatory reports or filings. 
  • Filing fees (paid to Canadian regulators). 
  • Taxes (HST is paid on the management fees and expenses)

 

How do you calculate the MER?
The MER and the figures used to calculate it are shown in the fund’s annual reports. It is calculated by dividing the total expenses of the mutual fund for the financial year as shown on its income statement, by the average net asset value of the mutual fund for the financial year.

How and when am I charged these MER fees?
MERs will be deducted directly from the fund holdings. In many cases fund companies will apply these MER fees on a daily basis and they will be paid out monthly from the fund.

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