Investment Fees: What to Watch Out For

Investment fees may seem small at first glance, but over time they can take a significant bite out of your long-term returns. The challenge is that many investors don’t realize what they’re paying — or how much those fees impact their growth.

Whether you’re investing through a bank, advisor, robo-advisor, or online brokerage, understanding what fees exist and how they work is essential for making smart decisions.

Here are the major investment fees Canadians should pay attention to — and how to avoid unnecessary costs.

1. Management Expense Ratio (MER)

The MER is one of the most common investment fees. It’s charged by mutual funds and ETFs to cover management, operations, and administration.

Even a small difference in MER can impact your long-term growth.
For example, a 2% MER vs. a 0.25% MER may not seem like much, but over decades, the difference can be tens of thousands of dollars.

What to watch for:

• High-fee mutual funds sold by big banks

• Active funds that underperform despite charging more

• Low-cost ETFs with MERs under 0.50%

If you’re unsure what you’re paying, check your investment statements — MERs are often listed in the fund details.

2. Advisory Fees

If you work with a financial advisor, you may pay:

• A percentage of assets under management

• A flat annual fee

• Hourly fees

• Commission-based fees

There’s nothing wrong with paying for good advice — but you should know exactly what you’re being charged and what value you’re receiving.

Watch out for:

• Advisors who sell high-fee mutual funds because they earn commissions

• Lack of transparency in how they are compensated

• Paying for advice you are not actually getting

Ask your advisor directly:
“How are you compensated, and what is my total annual cost?”

3. Trading Commissions

If you buy and sell your own investments, some platforms charge fees for each trade.

While many Canadian brokerages offer commission-free ETFs and stocks, some still charge $5–$10 per trade.

Watch out for:

• High trading frequency (over-trading increases costs)

• Paying commissions when free alternatives exist

• Buying small amounts too often

If you’re a long-term investor, keep trading minimal and intentional.

4. Account Fees

Some institutions charge extra fees simply for holding your investments.

Common examples include:

• Annual administration fees

• RRSP/TFSA maintenance fees

• Transfer-out fees

These fees aren’t always obvious, so checking your account details matters.

Watch out for:

• Institutions charging $100+ for transfers

• Minimum balance requirements

• Annual account fees that provide little benefit

Often, switching to a lower-cost brokerage eliminates these charges.

5. Hidden Transaction Costs

Some investment products include costs that never show up as a line item, such as:

• Bid-ask spreads

• Embedded trading costs in mutual funds

• Currency conversion fees

These can quietly reduce your returns without you realizing it.

Watch out for:

• Buying U.S. investments without a plan for currency exchange

• Actively traded mutual funds with high turnover

• ETFs with unusually wide bid-ask spreads

Understanding these small details helps you avoid unnecessary losses.

How to Reduce Investment Fees

You don’t need to eliminate fees entirely — just keep them reasonable.

Here are simple ways to reduce costs:

• Use low-cost index funds or ETFs

• Compare MERs before investing

• Ask advisors to disclose all fees upfront

• Consolidate accounts to reduce administration costs

• Review your investment statement at least once per year

Small decisions can save you significant money over your lifetime.

Final Thoughts

Investment fees are a normal part of investing — but they should be transparent, reasonable, and aligned with the value you receive.