How Much Do Financial Advisors Cost in Canada?

Video Script

Hi, Tiffany here. In this video, I’m going to go over the exact costs of working with a financial advisor in Canada so you know what you’re paying. Whether you have $1 million or $100 million in investments, the same issues come up.

Stay ‘til the end to find out where hidden fees show up. I’ll also show you how two advisors charging the same fee can end up costing you very different amounts.

I’m Tiffany Woodfield, a Cross-Border Financial Advisor and the co-founder of SWAN Wealth Management. I work with US and Canadian clients every day. And over the years, I’ve seen how much confusion there is about costs.

So let’s get into it!

A Lower Number Isn’t Always Lower

First, when you're comparing advisors, you might hear one say they charge 0.85% and another say 1% percent. It's easy to assume the lower number means less expensive, but that's not always true.

If you take ONE thing from this video it should be this: the underlying funds used in an investment portfolio can significantly increase your all-in costs. And these costs are not obvious.

Later in the video, I'm going to show you exactly where hidden fees get buried. But first, let’s go over the main ways you pay for advisory services.

4 Ways You Pay

First, in Canada, there are four main ways you pay for investment advice:

• Fees embedded inside investments, like mutual funds

• Commissions

• A percentage fee on your portfolio

• Flat or hourly planning fee

You could be paying anywhere from 0.5% to over 2% percent per year. What you’re paying depends on the firm’s cost structure and the underlying investments the firm uses.

Most people don’t know what they’re actually paying. It’s common to think one advisor costs less, when working with them could actually cost you double. — We’ll get into that later!

Fee-Only Explained

First, the term “fee-only” is not a standardized term in Canada. So if someone says they are fee-only, you need to ask them what that means.

Generally, a fee-only advisor charges in three ways: Hourly — Flat fee — And based on a percentage of assets under management or AUM.

If an advisor charges an hourly rate or a flat fee, that cost is typically not tax-deductible in Canada. The exception is if you’re paying for investment advice tied to earning taxable income. We’ll cover that in detail later. The key distinction of a fee-only advisor is that they don’t collect commissions. But, a fee-only advisor can still build portfolios using F-series funds.

These are funds that are designed for fee-based accounts. They often have a Management Expense Ratio or MER of 0.5% to 1.5% percent to percent annually.

Fee-Based Explained

The term “Fee-based” isn’t a standardized financial term either. It typically refers to an advisor or firm that charges a percentage of assets under management or AUM.

But, a fee-based advisor may also receive commissions or embedded compensation. For example, a fee-based advisor can sell insurance or use mutual funds that have additional carrying costs.

Fee-based simply means you’re paying a visible fee. But it doesn’t tell you what you’re invested in underneath or whether there are additional hidden costs.

The Cost of Financial Planning

Some investors hire a financial planner who charges a flat fee. The planner won’t manage the investments. But they will provide guidance.

Financial planning costs range from $2,000 to $30,000 depending on the complexity. And you may need a financial plan each year or at every major milestone.

In Canada, a financial plan is not tax-deductible unless the fees are directly tied to earning taxable investment income. So be sure to find out if your financial advisor’s planning service is included at no additional cost.

Tiered AUM Fees Explained

Some advisors use a tiered AUM structure while others use a flat percentage across the entire portfolio. With a tiered structure, you have to calculate each layer to figure out what you’re really paying.

Example Structure Cost Structure:

$1 to $1,000,000 - 1.5%

$1,000,001 to $3,000,000 - 1.25%

$3,000,001 to $5,000,000 - 1.0%

$5,000,001 to $10,000,000 - 0.85%

$10,000,001 to $30,000,000 - 0.65%

$30,000,001 to $50,000,000 - 0.5% 0.3% on everything above that

In this example, fees start at 1.5%. It looks like it would be 0.65% for a $10 million portfolio. But because of the tiered structure, the actual cost on a $10 million portfolio is just over 1%.

This still doesn’t tell you your total cost, because it doesn’t include the underlying investments.

For example, a firm may have a tiered cost structure that looks attractive. But, the portfolio may use packaged products with external expenses.

And if that’s the case, the all-in cost will be higher than the firm’s AUM fee. So even after doing the math, you still don’t have the full picture.

Next, let’s talk about the one type of fee that can lower your tax bill. This can be a significant benefit for Canadian taxpayers, but it only applies in specific circumstances.

Deductible Carrying Costs on Non-Registered Accounts

In Canada, investment management fees are tax-deductible in very specific cases. Under Canada’s Income Tax Act, investment management fees are only deductible if ALL of the following are true:

• The account is non-registered

• The fees are direct advisory fees, not commissions or other expenses

• The investments are for the purpose of earning income

• The fees are paid by the client, not embedded in a product

• The fees must be reasonable in the eyes of CRA -The tax deduction is claimed as a carrying charge, not a business expense

If you have a large non-registered investment account and you’re a high-income earner, deducting carrying costs could mean a big tax saving. I’ll show you how much you could save later in the video. But first, let me cover what’s not tax-deductible:

🚫 What Is NOT Deductible:

• RRSP management costs

• TFSA management costs

• Mutual fund MERs

• Standalone financial planning fees*

• Commissions of any kind

In the next section, we’re going to talk about hidden fees. And you’ll see exactly why this matters.

*Standalone financial planning fees are generally not tax-deductible unless they are tied to managing investments.

Cost Structures & Hidden Fees

It’s common for financial advisors to charge an AUM fee. But the actual percentage you pay and your total net costs depends on how your portfolio is structured.

There are three main portfolio structures:

• High-cost mutual funds with embedded fees F

• ee-based accounts using lower-cost F-series funds

• Portfolio Managers using individual securities and ETFs

We’re going to go over 4 different scenarios from the highest cost to the lowest cost. Pay attention to the differences because some of these options may be new to you.

4 Common Scenarios

For this example, we’re going to call our investor Jane. Jane is a tech professional who has 10 million in investable assets.

She has 8 million in non-registered accounts. And she has 2 million in registered accounts.

Jane is a high-income earner, which puts her in Canada’s highest marginal tax rate. In this case, she’ll pay about 50% tax on a portion of her income.

Scenario 1: Mutual Fund Advisor - Commission Only

In our first scenario, Jane decides to work with a big firm that focuses on selling mutual funds. The firm has a strong brand name, so she doesn’t think twice about it.

She pays 1.8% in fees each year for a total cost of $180,000. But since the fees are built into the fund, she doesn’t see them directly. The embedded fees are not tax-deductible.

Scenario 2: Fee-Based Advisor Using High-MER Mutual Funds + AUM Fee + Tax Deduction

In our next scenario, Jane decides to work with a full-service investment dealer. She pays her advisor a low fee of 0.5%.

However, she’s invested in mutual funds that have a MER of 1.5%.

She gets a $40,000 tax deduction on the advisor fee, which results in $20,000 in tax savings. And brings her net cost to $180,000 for the year.

Keep in mind that the advisor fee is deductible, not the underlying fund costs. Jane’s effective cost is actually 1.8%.

Scenario 3: Fee-Based Advisor Using F-Series Funds + Tax Deductions

In this next scenario, Jane decides to work with a well-known independent firm. The firm charges a conservative 0.5% on AUM. However, Jane’s portfolio is built with F-series mutual funds that have a MER of 0.75%.

Jane gets a $40,000 tax deduction on the advisor fee, which results in $20,000 in tax savings. And brings her net cost to $105,000 for the year. Her effective cost is 1.05%.

Scenario 4: Fee-Based Portfolio Manager + Tax Deductions

In our final scenario, Jane decides to work with a financial advisory firm operated by a portfolio management team. This firm creates its own portfolios using individual securities. The advisor fee on her $10M dollar portfolio is 0.85%.

Jane gets a $68,000 tax deduction on the advisor fee, resulting in $34,000 in tax savings. This brings her net cost to $51,000 for the year.

Her approximate cost is 0.5% after tax.

As you can see, two investors can have the exact same amount of money invested. But the way a firm structures your portfolio will change the total and effective costs.

The takeaway? The higher your income, the more benefits you get from tax-deductible advisory fees.

Invisible Fees

It’s important to note that embedded fees are deducted before you see your return.

You might think you’re only paying 1%. But if a firm uses a lot of high-cost mutual funds, you could be paying a lot more. These embedded fees may not show up on your investment slips if the funds are domiciled in the US. In Canada, new regulations mean embedded fees will be visible on your statements starting at the end of 2026.

But there is one exception. If investments are US based ETFs and funds, the fees will still not show up on your statements.

How to Find Out the Cost of Working with an Advisor

By this point, you might be wondering how you can find out the actual costs when you speak with a financial advisor.

I have 9 questions that you should ask to find out exactly what you’ll be paying.

• Are you paid any commissions from products?

• What is the total all-in cost I will pay each year?

• Do the funds you use have any embedded fees like MERs or TERs?

• What percentage of my portfolio will be in those funds?

• What is the actual average MER or TER of my portfolio?

• Will my statement show the full dollar amount of MER and TER costs for every fund, including US-listed ETFs?

• Do you receive any compensation beyond your advisory fee—directly or indirectly?

• How much of your fee will be tax-deductible?

• Is financial planning included, or is there an additional cost?

Here’s what it all comes down to: when you’re assessing the cost of an advisory team, you need to know HOW your portfolio will be structured. And you need to know if there are any HIDDEN costs.

Thanks so much for watching, and I’ll see you in the next video

Watch the video on YouTube: https://youtu.be/voe16-aix24