How would you like to make an extra $640 per year? If you have $100,000 in mutual funds, there’s an easy way to do just that, while annoying your adviser, all at the same time. Namely: the Mutual Fund Maximizer, offered by Questrade. The service was launched back in 2009, although I’ve only now learned about it. Details can be found here.
If you have no idea how your advisor gets paid, chances are they are commission-based. What that means in plain English is that they earn a fee, paid to them by the fund manager, that comes out of your portfolio. For equity or balanced mutual funds, this trailer fee typically ranges from 0.5% to 1% of the fund value, depending on whether you bought a back-end* or front-end load fund.
What Questrade does is give the money back to you, minus a $29.95 monthly processing fee. So, if you had $100,000 in a typical front-end-loaded mutual fund, you would receive cash in your pocket of $640 per annum. Because trailer fees are paid as a % of the value of the fund, the amount you receive would increase/decrease as the fund rises or falls in value.
Imagine if you bought a house and forever after — for as long as you owned that house — had to pay your agent an annual commission.
Commission-based financial advisors get paid each year that you sit in those mutual funds. Obviously, if your advisor gives you value over the year — and is helping you achieve your investment objectives — you’d hardly want to take away a major source of their income.
But if they’re not providing you with worthwhile support, you need to ask yourself just how much is their advice worth? Is it worth $640 per annum? Because over a 20-year period, $640 per year, compounded at 4%, will have grown to $19,057.
By the way, according to Questrade’s website, Sprott Asset Management no longer lets Questrade rebate fees on its funds. Ultimately, they may not be the only fund that resists, so it’s probably best to double check before you make a decision.
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* If your advisor sold you a back-end load fund, your costs could ultimately end up being much, much higher. Click here for more details.
