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Dale Jackson

Personal Finance Columnist, Payback Time


If you hold mutual funds in your discount brokerage account there’s a chance you’re being fleeced for services you’re not getting.

Many discount brokers continue to only offer the series of mutual funds that charge a trailer fee to pay for advice that isn’t even available to the investor. Trailer fees are hidden in a broader annual fee imposed by the mutual fund company to compensate the advisor who sells them. Since discount brokerages don’t provide advice, many of the trailer fees coming from the mutual fund company are not being returned to the investor.

A typical trailer fee is one per cent of the total amount invested in the fund. That one per cent is deducted each year whether the fund makes or loses money. It not only brings down annual returns but leaves the investor with less money in the fund to grow over time.     

Late last year Canadian Securities Administrators (CSA) proposed a ban on trailer fees paid to discount brokerages. It gave the industry three months to comment on the proposal but never actually imposed a ban.

If you hold mutual funds in your discount brokerage account there are ways to determine if you are paying trailer fees, although mutual fund fees can be ambiguous. Usually, it is labelled as an “A Series” fund.

Here’s a breakdown of how mutual funds fall into different series provided by the Ontario Securities Commission (OSC):  


Retail series (Series A)

Most individuals investing their own money buy these series or classes, as investors typically only need to meet minimal requirements and they receive advice from an advisor. These series or classes are typically available for purchase under one or more sales charge options. Advisors who sell the fund to investors usually receive commissions at the time of sale, as well as ongoing trailing commissions for the advice that they provide.

Discount series (Series D)

These series or classes are tailored to do-it-yourself investors who purchase mutual funds through a discount brokerage. Discount brokers that sell these series or classes typically receive a significantly reduced trailing commission since the investor does not receive advice. As a result, a discount series or class generally has a lower management fee than a retail series.

Fee-based series (Series F)

These series or classes are available to investors who have fee-based arrangements with their advisor. An investor in a fee-based series or class typically negotiates the rate of their advisor’s fee with, and pays such a fee directly to, the advisor. There are generally no trailing commissions on a fee-based series because the advisor is compensated based on the rate negotiated with the investor. As a result, this series generally has a lower management fee than a retail series.

Institutional and high-net-worth series (Series I)

These series or classes have high minimum investment requirements and are typically aimed at institutional investors (such as pension plans) or investors making large investments in the fund. Funds in these series generally have lower management fees than the retail series of the same fund.


The OSC warns that not all fund companies follow the same criterion or letters for a fund. Most discount brokerages list the series with the name or symbol of a mutual fund in a trading account. If there is an “A” next to yours, you are probably paying a trailing commission. If a “D” appears next to the fund you probably are not. To be sure, contact your discount broker and ask. If you are paying a trailing commission, there’s a chance the brokerage doesn’t offer the lower cost series. It’s also possible the mutual fund company doesn’t offer one.