What you really pay in investment fees

Fees are often the least visible part of an investment. They are rarely presented clearly, they are taken every year whether the markets go up or down, and over a long period they can take a larger share of the gains than most people imagine.

The layers of fees

An investment bought through a bank or a commission-based advisor often carries several layers of costs, which add up without ever appearing on a single line. There can be a sales charge when you invest or when you withdraw, although these have become less common in Canada. There is often an advisory or account fee, charged every year on the value of your account. And above all there is the management expense ratio (MER) of each fund you hold, which is also taken every year, directly from the fund's value, so you never see it debited.

In many traditional mutual funds sold in Canada, the MER is around 2% a year, and part of it can be a trailing commission paid to the firm that sold you the fund. A broad, low-cost index fund often costs ten times less. This difference seems small when expressed as a percentage, but it applies every year to all of your savings, not just to the gains.

What it costs over 20 years

Take an illustrative example: $100,000 invested for 20 years, with a return of 6% a year before fees. With total fees of 0.3% a year, the investment grows to about $303,000. With total fees of 2% a year, it grows to about $219,000. The difference, roughly $84,000, has gone to the various intermediaries rather than to you, for the same underlying investment.

This also explains why some accounts, after five years, are worth barely more than the amounts paid into it, and less once inflation is taken into account. The markets have not necessarily done badly; the fees have absorbed most of the return.

What to ask before you sign

Before accepting an investment proposal, ask for the total annual cost in dollars, all layers included: the fund's MER, any advisory or account fee, and any sales charge on entry or exit. Ask, too, how the person advising you is paid, and whether their pay depends on the product you choose. In Canada, your dealer must also send you an annual report on charges and compensation, which is a good starting point for this conversation.

The question is not whether you should pay for advice; good advice is worth paying for. It is whether you know what you are paying, and whether that cost is linked to the advice itself or to the products you are sold.

The figures in this example are illustrative and do not predict future returns. General information, current as of October 2026; not investment advice.