Investment funds: What are management fees for?

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3 min.

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When you start investing in investment funds, you will hear about “management fees.” You understand that you must pay them, but you may not know what they are for.

A new regulation came into effect on January 1, 2026, requiring some players in Canada’s financial industry to clearly and in detail disclose the amount of fees an investor pays on their investment portfolio.

This means greater transparency for you, giving you a better understanding of the costs associated with your investments. This is excellent news because it gives you the tools to:

Better understand the fees you pay
Assess the impact on your portfolio’s net returns
Use this information to make informed decisions

This new regulation applies to segregated funds, mutual funds and exchange-traded funds (ETFs), among others.

It’s important to understand that this new requirement does not result in any new fees. It simply means that they must now be listed on the annual statement in a way that is easy to understand.

What are these fees?

Operating expenses
Professional advice and agency fees
Guarantees specific to segregated funds
Sales taxes
Brokerage fees
Transaction costs

You don’t receive a bill for these fees. Depending on the type of fees, they may be:

Built into the calculation of the fund unit value and collected through the redemption of units in your fund
Deducted directly from the fund’s assets
Charged against the value of your contract

These fees are generally collected automatically and are reflected in the value of your investment or your contract.

What are the fees used for?

Fees are used to cover the services and operations required to ensure the sound management of the fund, including investment management, administration and oversight of activities. The end goal is to help protect your money from risk and support its growth over time.

Ensuring the management of investment funds

Funds are managed by teams of investment professionals, supported by seasoned portfolio managers. These professionals are responsible for tasks such as:

Analyzing financial markets
Estimating risk levels
Selecting types of investments
Tracking the performance of the companies that make up the fund and adjusting the portfolio to make sure it remains aligned with the investor’s risk profile.

All this gives the fund managers a clear picture of the situation and enables them to make informed decisions to earn the best possible returns for the funds.

Covering administrative expenses

There is also a whole administrative side behind the scenes, including:

Processing transactions (purchase and sale of fund units, transfers)
Preparing annual or semiannual investment statements
Providing investor (you!) services
Managing client records

All these tasks ensure that the fund is managed properly and that regulatory requirements are met.

Covering guarantee fees

These fees only apply to segregated funds. Unlike other types of investments, segregated funds offer attractive guarantees:

Capital protection: Your hard-earned money is protected, in whole or in part, against losses in value during market downturns.
Protection of investment earnings through resets, if this option is included in your contract. In other words, the fund’s value is calculated at a specific point in time and that value is then “frozen.”
Protection from creditors: If the contract owner declares bankruptcy or faces legal action, their investments may be protected from creditors.¹
Beneficiary designation: Designating a beneficiary helps avoid the usual lengthy estate settlement process, meaning that benefits payable are generally paid within 10 business days. It can also help reduce estate settlement costs (e.g., professional fees and probate fees).

To learn more, you can read this document: What exactly is a segregated fund?

Costs associated with advisor compensation: it’s worth it!

Instead of asking, “How much does it cost to work with an advisor?”, consider asking, “What can an advisor do for me?”

The top priority is safeguarding your and your family’s financial security. If numbers and financial planning are not your strong suit, working with an advisor can help, because that’s precisely their area of expertise.

They are the professional best positioned to guide you through your investment journey and help you achieve your financial goals. Their services include:

Asset growth: Building optimized investment strategies and managing risk based on the client’s risk tolerance.
Retirement: creating a tailored retirement plan and an effective withdrawal strategy when the time comes.
Wealth transfer: Estate planning, wealth transfer strategies, and support for your loved ones and/or beneficiaries.
Trusted guidance: An unbiased, objective perspective on your plans… and helping you avoid potentially costly mistakes!

Investors who work with an advisor for 15 years or more save 2.3 times more than their peers who do not.

Source: More on the Value of Financial Advisors, Claude Montmarquette and Alexandre Prud’homme, 2020.

Your advisor can review your situation with you and make any necessary adjustments as your needs evolve through life’s milestones (e.g., birth of a child, purchase of a home, illness, graduation, death).