Fees and MERs

Understanding mutual fund fees

Mutual fund fees are displayed in different ways, depending on the financial institution. At times, they can be hard to identify, which in turn makes them hard to avoid.

At Educators Financial Group, we believe in giving you and your family members targeted, well-rounded investment advice, so you can understand your financial portfolio as well as the fees that impact it. Knowledge is power, and mutual fund fees are no exception.

To learn more about fees and MERs, click on the corresponding topic below.

The difference between fees and MERs

In keeping with our goal of absolute clarity in terms of your understanding of mutual fund fees, please note that: management fees and management expense ratios (MERs) are not the same thing, as management fees are part of the MER. Therefore, management fees will typically be lower than the MER. You may believe you’re only paying the lower management fee, when in fact you’re actually paying the MER.

MER equation MER = (Management fee + Operating expenses) x (1 + HST)
How MER is paid by the fund
As mentioned, MER is paid out of the fund, which will then reduce the net asset value of the fund. Put another way, what you pay in fees reduces your return. If the fund had a one-year return of 5% for a fund with MER 2.235%, your return for the year would be 2.7650% once the MER is subtracted.
5 key things to know about mutual fund fees
1.With most things you buy, the fee is a predetermined dollar amount found on the price tag. A mutual fund fee doesn’t work that way. It’s calculated as a percentage of the fund’s net asset value; hence, the management expense ratio (MER).
2.Mutual fund fees and expenses of running the fund are paid out of the fund, rather than as a ‘charge’ you receive separately.

3. The MER is a combination of the management fees and operating expenses.

4. Management fees include the compensation for the expertise of a professional money manager, the people who pick and sell the stocks in the fund, and the administration of the fund.

5. Operating expenses include regulatory filing and daily expenses such as fund accounting and valuation.