Which Bank Charges the Highest Mutual Fund Fees?

Are any of these funds worth the fees they charge?

| More on:

An article in the Globe and Mail on Monday gave an update on an ongoing investigation on mutual fund fees by the Ontario Securities Commission. What was the update? Well, the investigation is ongoing.

In fact the study is nowhere near a conclusion, despite 16 months of “progress” thus far. So with that in mind, perhaps we at The Motley Fool can help just a little bit by comparing mutual fund fees at the different major banks.

Canadian equity funds

The following table compares the annual fee on each bank’s flagship Canadian Equity fund.

Bank Fund Annual Fee 10-Year Annual Return
RBC RBC Canadian Equity Fund 2.06% 6.3%
TD TD Canadian Equity Fund 2.18% 9.23%
Bank of Nova Scotia Scotia Canadian Blue Chip Fund 2.18% 4.95%
Bank of Montreal BMO Canadian Equity Fund 2.39% 6.44%
CIBC CIBC Canadian Equity Fund 2.39% 4.1%
Average 2.24% 5.65%

The “lowest fee award” goes to RBC (TSX: RY)(NYSE: RY), although the real winner is clearly TD (TSX: TD)(NYSE: TD), for having by far the best 10-year return.

The loser by both measures is CIBC (TSX: CM)(NYSE: CM). As an added bonus, CIBC also finishes last for transparency, since it was the only bank to hide the fund’s annual fee (the 2.39% number in the table above came from a third-party site).

The 10-year return for the iShares S&P/TSX Capped Composite Index ETF (TSX: XIC) is 8.12%, handily beating the average from the banks. In fact TD was the only bank to beat the index. So in general, Canadian investors are not getting good value.

So what should the OSC do? Capping fees is the first answer that comes to mind, but that would be too difficult to implement, and would be unfair to outperforming funds like TD’s. And price ceilings contradict fundamental economic principles; if investors are willing to pay high fees, they should be allowed to.

A better solution is to mandate increased transparency. Funds should show the fee clearly, and display it as an “Annual Fee”, rather than the more technical term “MER”. Fund providers should also be forced to show the benchmark’s returns alongside their funds’ performance, so investors can clearly see what they get for their money.

Foolish bottom line

For those of you who prefer to buy funds rather than stocks, buying the index is never a bad idea – a previous article highlights the three best ways to do so. Just don’t expect any help from the banks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

grow money, wealth build
Dividend Stocks

3 Stocks That Will Make You Richer in 2024

When it comes to creating riches in 2024, these companies offer the best, most solid chance while providing dividends while…

Read more »

oil and gas pipeline
Dividend Stocks

Is it Too Late to Buy TC Energy Stock?

TC Energy is up 17% in recent months. Are more gains on the way?

Read more »

dividends grow over time
Dividend Stocks

If You Invested $1,000 in goeasy Stock in 2014, This Is How Much You Would Have Today

When it comes to growth, it's hard to beat goeasy (TSX:GSY) stock. But what should investors consider for future growth,…

Read more »

Utility, wind power
Energy Stocks

Brookfield Renewable Partners Stock: Buy, Sell, or Hold?

BEP stock (TSX:BEP.UN) now trades at half its share price back in 2021. So what should investors do with this…

Read more »

Supermarket aisle with empty green shopping cart
Stocks for Beginners

3 Retail Stocks to Buy Hand Over Fist in February

These retail stocks offer huge growth for those getting in now and holding long term, especially after earnings demonstrate their…

Read more »

Value for money
Dividend Stocks

Better Buy in February 2024: Magna Stock vs. BCE Stock

Both Magna stock (TSX:MG) and BCE stock (TSX:BCE) have faced troublesome stock prices of late, but which is offering value?

Read more »

Growing plant shoots on coins
Dividend Stocks

3 No-Brainer Dividend Stocks to Buy With $1,000 Right Now

These three dividend stocks look like an excellent addition to your portfolio.

Read more »

Energy Stocks

2 No-Brainer Energy Stocks to Buy With $5000 Right Now

Cenovus Energy is one of two high quality energy stocks that are undervalued and well-positioned for long-term success.

Read more »