A two per cent fee on a few thousand dollars in investments might not seem like a big deal. Or at least not at first, when you’re building your wealth bit by bit and seeing your portfolio grow.
But over time, the dollar amount paid in fees every year — and its compounding bite out of your investments — tell a different story.
An investment fee, often included in the management expense ratio or MER reports, is an annual charge an investor pays to a portfolio manager for managing mutual funds or other structured investments, such as exchange-traded funds or ETFs. Fees can vary, but experts say the bar to justify even a two per cent annual charge is a lot higher than most investors think.
Levi Ewald recalled looking at his parents’ mutual fund holdings with a little more than two per cent in fees a year, even though they did “not necessarily receive the most tailored investment advice while they’re paying such a high percentage.”
Ewald, a physiotherapist-turned-personal finance expert, said it was one of the reasons he grew interested in personal finance.
Mutual fund fees generally range anywhere between 0.5 per cent and three per cent or even more for specialized products, while ETF costs generally average around 0.2 per cent, but can be higher depending on how they’re managed.
Many investors don’t realize there’s an annual deduction, or they lose track of the charges, Ewald said.
“It kind of just comes out of the fund’s return,” he said. “It’s not like you get a bill in the mail for $2,000.”
But the main problem is the compounding effect of fees, Ewald said.
“It doesn’t sound like that much when you look at just that two per cent mark,” Ewald said. “If you start looking from a dollar perspective, then it gets a little bit larger.”
A management fees calculator by Quebec’s financial regulator Autorité des marchés financiers (AMF) shows the math over time.
For example, a thousand-dollar investment with an expected eight per cent annual return would grow to just over $10,000 over 30 years without any fees. But a two per cent annual fee would mean the same initial investment would only grow to about $5,500 over the same period, stunting the annual return rate to about 5.8 per cent during the three decades.
“Every dollar taken is a dollar that stops compounding for you,” Ewald said.
Annual fees are charged whether or not the portfolio sees gains in a year. That means investors could pay a fee out of the initial or principal amount they otherwise hoped to see grow.
Colin White, CEO of Verecan Capital Management, said investors need to compare the fees with what they’re getting out of it in services.
A higher fee should not just pay for returns, but also justify the advice an investor is getting — tax planning, savings for retirement and holistic financial planning, White said.
“A good adviser is going to provide a lot more,” he said. “All those other soft things are actually way more valuable than being absolutely the best investment.”
The Canadian Investment Regulatory Organization is streamlining how fees are reported starting next year, pushing for transparency on total investment costs that include management and trading expenses, among others.
Under the upcoming total cost reporting changes, annual statements would include both the percentage fee as well as the dollar amount.
Ewald suggested asking the portfolio manager upfront how they’re getting paid and asking more questions about fees, growth and what’s under those funds before signing up.
“Once you understand how big of a role fees have in your portfolio, you either make the decision that you’re OK with paying those fees because you’re getting enough value for it, or you make the decision to move to a much lower cost option,” he said.
This report by The Canadian Press was first published Sept. 24, 2026.
