“Trailer fees are the least understood topic for investors,” says Pramod Udiaver, chief executive officer at online portfolio manager Invisor Investment Management Inc. In fact, some experts say that banning third-party embedded commissions, including banning trailing commissions on mutual funds sold through discount brokerages and direct from the manufacturer, is long overdue. One side of the debate believes that there is an immediate need to reform mutual fund fees.

Industry stakeholders are split almost down the middle on the issue. The Canadian Securities Administrators are taking a serious look into the matter and considering the possibility of banning embedded commissions or trailer fees – a move Britain and Australia have already taken. The big questions right now are whether embedded commissions should be banned altogether, have more rules and regulations attached to them or just left as they are. Segregated funds offered through Insurance companies carry similar fees.Įmbedded commissions are a very hot topic in the insurance industry right now. These services can include, answering questions about the performance of your investments and other related matters. The trailer fee compensates the advisor for ongoing service. Commissions generally range from 0.25% to 1% and are paid out of the management fund’s expenses. This commission is paid as long as you hold units in the fund. Morning Star defines embedded sales commissions (also known as trailer fees) “as service commissions paid by the mutual fund company to the sales representative managing your mutual funds.

Invisor investment management inc