Dale Jackson

Personal Finance Columnist, Payback Time

Follow|Archive

It’s no secret Canadians pay the highest investment fees in the developed world.

But it’s not just the size of the fees that stings. It’s also the hidden fee traps the industry sets for moderate net worth investors looking for professional advice.

News this week that CIBC admitted to overcharging some clients for several years through embedded fees can only be met with resignation because regulators did nothing to make fees more transparent when Scotiabank, CI Investments and TD Bank admitted to similar problems a few years ago.

The most common embedded fees are management expense ratios (MERs) on mutual and exchange traded funds; expressed as percentages of the total amount invested and automatically withdrawn from the client account each year.

Add the MER to other hidden fees like loads and commissions and investors could be paying thousands of dollars every year – thousands of dollars that could be growing in their portfolios.     

One alternative that may seem expensive on the surface, but could in fact be much cheaper, is fee-only advisors; also known as money coaches. Fee-only advisors charge an upfront fee as you retain their services, like a lawyer. You decide when and how much of their services you need.

Money coaches advise from the bench. You actually go out and play by making the trades in your own account. Money coaches are ideal for millennials and other investors with a mish-mash of investments made through the years to beat the RRSP deadline or top up TFSAs.

Money coaches can recommend investments and provide guidance on lowering risk and maximizing opportunity by diversifying holdings across sector, geography or risk levels. They can also set up tax strategies by allocating the right amounts to RRSP, TFSA or non-registered accounts.

In some cases a money coach could provide insurance and estate planning.   

Fees could be a couple thousand dollars to set up a comprehensive financial plan to match your personal goals and risk tolerance, and a couple hundred dollars an hour for subsequent visits – perhaps annually or when a specific personal or market event occurs.      

There aren’t many fee-only advisors out there but Money Coaches Canada is one online service that provides a network of fee-only advisors that could suit your taste.