Dale Jackson

Personal Finance Columnist, Payback Time

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It’s no secret Canadians pay the highest mutual fund fees in the developed world. What might be surprising is that there's one fee investors don’t need to pay – and all they have to do is ask.

The fee is called a load; a one-time charge based on a percentage of the assets invested, given to a commission-based advisor when a mutual fund is bought or sold. That’s not to be confused with a trailer fee; an annual fee given to the same commission-based advisor based on a percentage of the assets invested.

There’s not much a mutual fund investor can do about the trailer fee because it’s embedded in a bigger fee that goes to the mutual fund company, but loads are negotiating tools that advisors can easily drop for investors who drive a hard bargain. Many good quality mutual funds don’t even charge loads and the threat of putting your money in a no-load fund should be enough leverage.

Some mutual funds allow the investor to choose whether they want to pay a load when the fund is bought or sold. The load when the fund is bought - also known as a front-end load or initial sales charge - can be as high as five per cent of the assets invested. A back-end load - or deferred sales charge - can also be as high as five per cent but usually drops or is eliminated after the fund is held for five years.

Under new advisor fee disclosure rules, loads must now be expressed in dollar amounts as well as a percentage. A five per cent front-end load on a $100,000 investment comes to $5,000.

Assuming the value of the investment goes up over time a back-end load can be even costlier. A modest five per cent annual gain on a $100,000 investment over five years becomes $127,630. A five per cent load would come to $6,381.