After you’ve opened an investment account, you should receive an account statement, electronically or on paper, from your investment advisor or firm. The frequency of your investment account statements will vary. You should receive one at least once a year, and one every month in which a transaction occurs. Sometimes, you will receive a statement every three months.
How do I read my statement?
While the look and feel of account statements can vary, they all contain similar information about you and your investments. This includes:
- Account information – Shows basic information about your account, including your name, address, account number, and the time period the statement covers.
- Portfolio summary – Shows the different types of investments you have in your account.
- Portfolio details – A detailed list of your investments. This usually shows the market value of your investments (what they would be worth if you sold them on the date of the statement). You can use this information to keep track of how each investment is performing. Statements may also include the price you paid when you initially invested. If so, you can easily compare the price you paid against the current market value on the date of your statement.
- Account activity and transactions – Lists any investments bought or sold during the period covered by the statement. This includes the date of each purchase/sale, what you bought or sold, the quantity and the price. It also lists any dividends and interest you may have received.
What should I do with my statement?
Check it for accuracy: As with a bank statement, you should check it when it arrives to make sure it is accurate and complete, and be sure your investments are consistent with what you discussed with your advisor.
Use this checklist to check off each item on your statement as you review it.
Keep it safe: Always keep your statements in case you need them later.
Annual reporting on performance and fees
Canadian securities law requires all investment advisory firms to provide clients with annual reporting on investment performance and the fees paid. These reports work together to tell you more about what you have paid to your investment firm over the past year and how your account performed during that same period.
Important: While these reports help increase the transparency around your account’s performance, there are other factors that you should consider and be aware of when making investment decisions. Talk to your advisor and ask questions to make sure you have all the information you need.
All investments carry fees. Some fees may be charged directly to you. Other fees are built into the cost of an investment. Fees reduce the net returns you receive from an investment. You have the right to ask your advisor about fees and commissions, and get a clear answer before you buy.
Your annual fee statement will include information about what you paid for the services and advice you received from your advisor and their firm. Use that information to help you determine the value you received for the fees you paid. If you do not understand the fees set out in your annual summary, ask your advisor to explain them.
Some fees you pay once for a specific transaction, and the money comes out of your account. Other fees you pay on an ongoing basis and the money comes out of your investment each year until you sell it.
Investment Type and Fees
An annuity is a type of investment contract that pays you income at regular intervals, usually after retirement.
You pay an up-front commission or sales charge when you buy an annuity. The commission can be up to 3% of the lump sum you are depositing. Most annuity costs and charges are factored into the calculation of your annuity payments.
A bond is a certificate you receive for a loan you make to a company or government (an issuer). In return, the issuer of the bond promises to pay you interest at a set rate and to repay the loan on a set date.
Brokers typically charge a flat rate commission to purchase bonds, so buying more can help keep your relative costs down. If you want to sell your bonds before the loan repayment date, you will need to call your broker to make a trade and pay commissions again.
When purchasing bonds, you may be told that there is no trading commission. What often happens is the price of the bond is marked up, so the cost you are charged essentially includes the commission fee.
EXCHANGE TRADED FUND
An exchange traded fund (ETF) is an investment fund that holds assets such as stocks, commodities or bonds. Exchange traded funds trade on stock exchanges and have a value that is similar to the total value of the assets they contain. This means that the value of an exchange traded fund can change throughout the day.
ETFs have two main types of fees:
- Like a stock, you will usually pay a trading commission to the investment firm every time you buy or sell an ETF.
- Like a mutual fund, ETFs pay management fees and operating expenses. This is called the management expense ratio (MER). MERs for ETFs are usually lower than those for mutual funds in the same class. They are paid by the fund, and are expressed as an annual percentage of the total value of the fund. While you don’t pay these expenses directly, they affect you because they reduce the returns on your investment.
GUARANTEED INVESTMENT CERTIFICATE
A guaranteed investment certificate (GIC) is an investment that protects your invested capital. GICs can have either a fixed or a variable interest rate.
There are no fees or charges to buy or hold a GIC because your bank covers its costs when it sets its GIC rates. However, you may pay a penalty or lose the interest on the GIC if you cash it out early.
A mutual fund is a type of investment in which the money of many investors is pooled together to buy a portfolio of different securities. A professional manages the fund and invests the money in stocks, bonds, options, money market instruments or other securities.
Sales charges are normally associated with mutual funds. You may pay a sales charge when you buy or sell units or shares of a fund. These sales charges are also known as loads. Funds may be offered with a front-end load, back-end load, low load or no load. These sales charges are set by the mutual fund company.
Types of sales charges:
- Front-end load
Some mutual funds charge a fee when you buy your units or shares. This is a percentage (up to 5%) of the amount you are buying. The fee is paid to the investment firm that sells you the fund. You can negotiate this fee with your advisor.
- Back-end load or deferred sales charge (DSC)
Some funds charge a fee of up to 6% when you sell your units or shares. The amount you pay will be less for each year that you keep the fund. Usually after about 5 to 7 years, the fee for selling drops to zero. These types of charges will no longer be allowed in Canada for funds bought on or after June 1, 2022.
- Low load or low sales charge (LSC)
Low load funds charge a lower sales charge (up to 3%) when you buy your units or shares, and a lower fee (up to 3%) when you sell them. The fee when you sell usually disappears after you’ve held your units or shares for 3 years or longer.
- No load
A no load fund doesn’t charge a sales fee when you buy or sell its units or shares. However, this does not mean that there are zero fees. While you might not be charged a fee when buying or selling, they may charge other fees. The best way to know is to read the fund’s prospectus or ask your advisor.
Management expense ratio – Like ETFs, mutual funds also have a management expense ratio (MER). The MER consists of the fund’s management fee and operating expenses including legal and accounting expenses. The MER is the total of all expenses, expressed as a percentage of the fund’s value. They are paid by the fund and are expressed as an annual percentage of the total value of the fund. MERs can range from less than 1% to more than 3%. While you don’t pay these expenses directly, they affect you because they reduce the fund’s returns. This can add up over time.
Trailing commission – Many mutual funds and ETFs also pay a trailing commission to your advisor and firm. The trailing commission is an ongoing charge and is intended to compensate your advisor and firm for providing you with ongoing advice and services. The trailing commission is paid out of the fund’s MER. The manager pays this commission for as long as you hold the fund and the rate depends on your sales charge option. While you don’t pay these expenses directly, they affect you because they reduce the fund’s returns.
POOLED OR SEGREGATED INVESTMENT FUND
A pooled or segregated investment fund, much like a mutual fund, is set up by an insurance company and segregated from the general capital of the company. The main difference between a segregated fund and a mutual fund is the guarantee that, regardless of fund performance, at least a minimum percentage of the investor’s payments into the fund will be returned when the fund matures.
Fees for segregated funds are similar to those of mutual funds, including sales charges, management expense ratio, and trailing commissions.
A stock is a unit of ownership in a company which is bought and sold on a stock exchange. Stocks are also called “shares” or “equities”.
If you work with a full-service investment firm, the fees you pay on stock trades will depend on the type of account you have:
Commission-based account – Fees are charged per transaction based on buying and selling stocks and bonds. The dollar amounts vary. For example, one dealer may charge you $50 each time you buy or sell stocks, whereas another might charge you $75 each time you buy or sell.
Fee-based account – For fee-only services, the advisor charges a set rate and does not collect commissions. The rate is based on a percentage of your portfolio’s value.
This fee is negotiated at the beginning of your client-advisor relationship and pays for the cost of managing your overall portfolio.
The annual fee includes the cost of advice and trading commissions. The fee is typically 1-2% of the value of your account.
Learn more about fees and how your advisor is paid.
Use this investment fee calculator to see how a fund’s management expense ratio (MER) fees quickly add up and can have a big impact on your investments over time.