It is important to understand how costs affect investments in your group savings plan, what benefits are associated with those costs and how they provide value to your employees. RBC provides your plan members with several different investment options to help them reach their financial goals, including mutual funds. Understanding the cost of mutual funds is important as not all mutual funds in Canada have the same fee structure and costs may be represented in a variety of ways within group programs.
Our aim and long-standing commitment is to provide clients with a superior investing experience based on our core principles of delivering value, choice and transparency in everything we do. When it comes to costs, we strive to keep our Management Expense Ratios (MERs) equal to or below mutual fund industry averages, and we monitor the MER of each RBC Asset Management fund versus those of our competitors to ensure we remain a leader in delivering excellent value to the investors of our funds.
Management Expense Ratio
The Management Expense Ratio (MER) is the total of the management fee, operating expenses (or administration fee) and taxes charged to a fund during a year, expressed as a percentage of a fund’s average net assets for that year. All mutual funds have an MER. The returns investors earn for mutual funds purchased through a regular distribution network like a mutual fund dealer — whether reported on their statement, in newspapers or in other promotional material — reflect performance data that is reported after the fund’s MER is deducted. For example, if your fund’s investments gained 9% last year and the fund’s MER was 2%, the reported return would be 7% for that time period.
This formula may vary from other providers leveraging a group model, who may charge plan administration fees separately or who may calculate and report gross performance when communicating with plan sponsors.
Management fees generally include two primary components. The fee paid to the mutual fund manager for managing investments and the ongoing fee paid to advisors and their firms for providing ongoing advice and service (commonly known as trailers or trailing commissions).
Operating expenses include regulatory filing fees and other day-to-day expenses including:
- Record keeping
- Accounting and fund valuation costs
- Custody fees
- Audit and legal fees
- Costs of preparing and distributing annual and semi-annual reports and prospectuses
- Costs and expenses related to a fund’s independent review committee
- Borrowing costs of the fund
How our Mutual Fund Pricing Works
The RBC Group Savings Plan model provides your members with our full service experience and range of account options. Our servicing of your Group RRSP program is provided with no additional group plan annual administration fees. Your Plan Members have access to our competitively priced investment options based on the account selected including RBC Funds, Series A and D with all administration fees included in the MER.
Series A funds are offered through our full service distribution options, including RBC Royal Bank / Royal Mutual Funds Inc. and RBC Dominion Securities. These funds are priced based on the inclusion of the personalized investment advice employees enjoy.
Series D funds provide reduced MERs for individuals not seeking advice and are available through our RBC Direct investing distribution option. A full listing of our MERs is available on the RBC Asset Management Website at www.rbcam.com under Mutual Fund performance or can be found in our annual prospectus.
Of note, according to the HSBC fifth annual Future of Retirement survey, one of the main concerns confronting the pension industry is “poor levels of financial understanding, education and access to advice”. The survey highlights the gap between insufficient financial education/guidance and a lack of preparedness. Ninety per cent (90%) of respondents said they don’t feel fully prepared for retirement while 57% said they have undertaken little or no planning for future life. What is more, 43% of the respondents have no financial education and 47% have never had professional financial advice.
Options with professional advice included in the overall cost of investing helps address this gap in financial understanding while increasing the overall value you provide to your employees. With RBC, our MERs include providing qualified investment professionals, access to our national branch network and a host of other advantages including online account access and state of the art asset allocation calculators you and your members can take advantage of.
If you are interested in additional information or have any questions, please visit our website at www.rbcgfs.com or contact us at 1-800-835-3855 |
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