FREQUENTLY ASKED QUESTIONS

How do we get paid?

One of the most common questions we receive is whether there is a direct out-of-pocket fee for our advisory services. The reality is that you do not pay your advisor directly; instead, compensation is built into the fund’s Management Expense Ratio (MER).

A portion of this ratio, known as a ‘trailing commission’ or ‘service fee,’ is paid by the fund company to the advisory firm. This covers the costs of ongoing advice, financial planning, and account administration, ensuring you receive professional guidance without the need for separate monthly service bills.

What is MER?

The Management Expense Ratio (MER) represents the combined total of all the costs associated with running and managing a mutual fund or ETF. It is expressed as an annual percentage of the fund’s total assets.

What does the MER cover?

The MER is not just one fee; it is a bundle of several different costs:

  • Operating Expenses: These cover the “back-office” costs, such as legal fees, auditing, record-keeping, and administrative services.
  • Management Fee: This pays the professional portfolio managers who decide which stocks or bonds to buy and sell.
  • Trailing Commissions: This is the portion of the MER paid to the financial advisor or firm as an ongoing service fee.
  • Taxes: In Canada, for example, the MER includes the HST/GST charged on management and operating fees.

How is it paid?

You usually do not see the money taken out directly from your account. Instead, it is automatically deducted from the fund’s performance. This means the performance numbers you see in your statements are already “net of fees.”

Example :

  • Gross Investment Return: 10%
  • MER: 2%
  • Your Net Return: 8% (what you see in your statement)
What can RESP funds be used for?

To use the grant and growth portion—known as Educational Assistance Payments (EAPs)—the student must be enrolled in a post-secondary program at a “designated educational institution. The CRA is generally flexible regarding what the funds cover, as long as the expense is related to the student’s education and success. Common uses include:

  • Tuition and course fees
  • Housing (Rent and utilities)
  • Textbooks, lab supplies, and course-related materials
  • Laptops, tablets, and specialized software
  • Food and meal plans
  • Transportation (Public transit, gas, car insurance, vehicle maintenance)
  • Furniture for student housing (Desk, bed, kitchen essentials)
  • Professional tools or equipment for trade programs (e.g., culinary kits, tools)
  • Student medical or dental expenses not covered by insurance
  • Travel costs for commuting between school and home

What if the child doesn’t go to school?

If the beneficiary decides not to pursue further education:

  • Withdrawal: You can take your original contributions back tax-free, but the government grants must be returned to the CRA.
  • Change the Beneficiary: You can often name another sibling as the beneficiary.
  • Transfer to RRSP: If you have contribution room, you may be able to transfer up to $50,000 of the investment growth into your RRSP.
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