In Canada, mutual funds are the largest held embedded fee investment product available. They are categorized by a class system, of which most investors are familiar with the A-Class fund predominately used by financial advisors or mutual fund representatives.
The A-Class fund can generate the highest possible commissions. In Canada, the average management expense ratio for an A-Class mutual fund – which is the cost of owning the fund – is 2.53%.
However, as of December 31st, 2015, the A-Class mutual fund is under serious fire. Regulators are forcing the disclosure of the 1.00% trailer given to advisors and exposing commission bonuses.
Therefore, enter F-Class Funds. This class of mutual funds pay no sales commissions, trailer fees, or other compensation to the advisor.
So are F-Class funds a trick? Or are they actually a treat? At HighView, we take great pride in facilitating dialogue in the management of wealth. We ask that you use caution if you’re being promoted fee-based accounts or F-Class funds from mutual fund representatives or financial advisors.
We encourage you to watch our video, where we break down how F-Class funds can still have hidden fees investors don’t know about.