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Smith Falconer Financial Group

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Address West Tower, The Bay Adelaide Centre 333 Bay St., Suite 2800 Toronto ON, M5H 2R2
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Smith Falconer Financial Group

November 05, 2023

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Unpacking MERs

In our recent blog post, “Active Share”, we discussed the benefits of actively managed investment strategies. We highlighted that active equity fund managers can only look to achieve outperformance, in excess of fees, by actually being different from the benchmark index.

 

This week, we want to discuss the fees imbedded in the actively managed funds that we routinely recommend to clients. The cost of investing in one of these funds, is the Management Expense Ratio (MER). It is expressed as a percentage, and calculated by dividing a fund’s total annual expenses by its assets.

 

MERs are made up of three parts: management fees, operating expenses, and taxes. The management fee portion pertains to investment management, and the due diligence portfolio managers and their teams do to make informed investment decisions. A portion of the management fee, called a “trailing commission”, can be attributed to your Investment Advisory team for the communication about the strategy that they provide. Operating expenses include reporting, tax slips, statements, accounting, fund valuation, and the cost to hold investors’ assets. Taxes are both GST and HST.

 

MERs can vary based on if the fund is held in a transactional or fee-based account. In the majority of cases, transactional accounts hold Series A funds, whereas fee-based accounts hold Series F funds. Series F funds typically have a lower MER than their Series A counterparts, as the investor pays a fee to their advisor through the account and not through a trailing commission included in the MER. A benefit of this structure is that fees paid to your advisor are tax-deductible in non-registered accounts.

 

In both accounts, the MER covers the compensation of investment professionals for what they do every day – investing for long-term outperformance. Research completed by the Investment Funds Institute of Canada (IFIC) shows that investors with advice are found to accumulate 3.9x more assets after 15 years than comparable non-advised investors1.

 

In understanding your investment objectives, Smith Falconer Financial Group (SFFG) is able to present you with a custom strategy, that is monitored and reviewed for years to come, to achieve long-term growth and peace of mind. These customized investment strategies typically include actively managed equity funds, where expectation of realizing pleasing results is higher with patience and time.

 

1https://www.ific.ca/en/articles/canadian-investors-value-advice/#:~:text=Helping%20investors%20achieve%20their%20financial,compared%20to%20non%2Dadvised%20investors

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<p class="x"><span arial="" style="font-family:"><span style="color:black">This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. &copy; CIBC World Markets Inc. 2023. </span></span></p> <p class="x">&nbsp;</p> <p class="x"><span arial="" style="font-family:"><span style="color:black">CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and &ldquo;CIBC Private Wealth&rdquo; are trademarks of CIBC, used under license. &ldquo;Wood Gundy&rdquo; is a registered trademark of CIBC World Markets Inc.</span></span></p> <p class="x">&nbsp;</p> <p class="x"><span arial="" style="font-family:"><span style="color:black">Lois Smith and Rodney Falconer are Investment Advisors with CIBC Wood Gundy in Toronto. The views of Lois Smith and Rodney Falconer do not necessarily reflect those of CIBC World Markets Inc. </span></span></p> <p class="x">&nbsp;</p> <p class="x"><span arial="" style="font-family:"><span style="color:black">Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.</span></span></p> <p class="x">&nbsp;</p> <p class="x"><span arial="" style="font-family:"><span style="color:black">If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.</span></span></p> <p class="x">&nbsp;</p> <p class="x"><span arial="" style="font-family:"><span style="color:black">Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed. Their values change frequently, and past performance may not be repeated.</span></span></p>
 

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2023.

 

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.

 

Lois Smith and Rodney Falconer are Investment Advisors with CIBC Wood Gundy in Toronto. The views of Lois Smith and Rodney Falconer do not necessarily reflect those of CIBC World Markets Inc.

 

Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

 

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

 

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed. Their values change frequently, and past performance may not be repeated.

 
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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


CIBC Private Wealth services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license.