Understanding investment fees

What are investment fees?

Investing in a fund involves costs that are often referred to as “investment fees” or “management fees” and expressed as a percentage of the fund’s value. These fees are used to compensate the professionals who manage the funds and work to grow your savings.

What are the most common investment fees for a group retirement savings plan investment fund?

• Basic management fees: These fees cover the costs of administering the plan (e.g., contract management, registering the plans with regulatory bodies, accounting and tax statements) as well as commissions payable to an advisor, if applicable.
• Fund manager fees: These fees cover costs related to managing the fund portfolio and selecting the securities within that portfolio, such as stocks and bonds, in accordance with the investment policy. Fund management services may include, for example, analyzing the economy and financial markets, analyzing and trading financial securities, and managing trade orders.
• Fund operating fees: Because investment funds are so tightly regulated, these fees are used to pay expenses related to maintaining the fund, such as fees for auditors and legal counsel, bank fees and deposits, and safekeeping expenses. They usually represent a low percentage of the total fees and are deducted directly from the investment fund.

Investment fund returns published for group retirement savings plans are generally gross returns, which means that they don’t include management fees, as these are different for each plan and each fund..

In addition to investment fees, there are also other fees, often referred to as “administration fees,” that may be included periodically for additional services for your group retirement savings plan, such as withdrawals while still employed, insufficient funds for preauthorized payments, additional copies of receipts or tax slips, etc.

What is the financial impact of investment fees?

The return on your savings is what they earn you—the difference between the amount of money you have invested and the variation of its value over time. Your returns will vary based on financial markets’ performance, and the investment fees you pay will be deducted from them. Every dollar paid in investment fees is a dollar that you don’t get in overall returns.

Investment fees vary based on the type of investment and the type of management being used, either active management or passive management. Fees are generally lower for passively managed funds because less analysis and trading is required.

One of the main advantages of group retirement savings plans is that investment fees are generally lower than those offered for individual plans by financial institutions such as banks. In the long term, this difference in fees can add up to a significant impact on your savings.

Example of the long-term impact of different investment fees:

* For illustrative purposes only. Investment fund returns are subject to financial market fluctuations and are not guaranteed by iA Financial Group. In addition, an investment fund’s past results are not an indicator of future performance, and its value could increase or decrease.

In addition to learning about the different investment funds, their risk levels, objectives and holdings, it’s also a good idea to compare their fees before making an investment decision.

Remember, these fees will impact your overall savings, your purchasing power, the achievement of your goals, and therefore your financial wellbeing!