An account with management fees usually has two primary types of fees: the annual management fee charged for the management of the portfolio and the fees associated with the underlying investments in the portfolio. The annual management fee (usually based on a percentage of assets) varies by firm and the level of assets in your portfolio. The other costs are usually tied to the operating expenses of individual funds in the portfolio and commissions or transaction fees charged to buy and sell the underlying investments.
Impact of portfolio management fees
Hypothetical illustration based on a $100,000 investment with a 5% return.
After 10 years, layers of fees have accounted for a nearly 15% loss in net value.
The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product. Dividends and interest are assumed to have been reinvested, and the example may not reflect the effects of taxes or all possible account-related fees. Assumptions include: Blended portfolio of ETFs and mutual funds with an average operating expense ratio (OER) of 0.55%. Annual management fee: 1.00%.
What can I do about this?
Review your statements carefully, looking beyond the annual management fee to assess what your total costs are. You can then evaluate the returns on your portfolio and the service you are receiving, to consider if what you’re paying is worth it.
Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling 800-435-4000. Please read the prospectus carefully before investing.
Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).