In this report, registered dealers and advisers must provide an annual summary of all charges incurred in your accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition and all other fees received by the dealer or adviser that relate to your account. Dealers or advisers are required to disclose fees received from third parties, such as trailing commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition and referral fees, generated as a result of your account. They are also required to tell you about any fees received from debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition securities transactions.
Changes effective July 2016
While all registered dealers and advisers are required to implement these changes as of July 15, 2016, you may not receive the new report on changes and other compensation until 2017. Talk to your dealer or adviser to find out when you’ll get yours.
Types of charges and fees
1. Operating charges
This section will include any operating charges paid by you in the period covered by the report. Operating charges includes fees such as administration fees, safekeeping fees, management fees, transfer fees, account closing fees and any other fees associated with maintaining and using your account.
2. Transaction charges
This section will include transactionTransaction The process where one person or party buys goods or services from another for money. Examples include taking money out of an account, buying something with a credit card or taking out a loan.+ read full definition fees paid by you during the period covered by the report. Transactions charges include fees such as transaction fees, switch or change fees, performance fees, short termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition trading fees and sales charges or redemption fees.
3. Payments from third-parties
Dealers and advisers must also report any payment they receive from third parties (such as companies selling securities or other registered firms) in relation to your account. Examples of third-party fees include referral fees, success fees (fees paid on the completion of a transaction) or finder’s fees.
4. Trailing commissions
Dealers and advisers must disclose the amount of trailing commissions they receive in respect of your account. They must also provide a brief explanation of what trailing commissions are.
Registered dealers and advisers are required to provide their clients with the new annual report on charges and other compensation. Talk to your advisor if you don’t understand the charges and fees in the report, or contact the Ontario Securities Commission.
The new Report on Charges and Other Compensation and the new Report on Investment Performance must be delivered together and are account-based. If you have a number of accounts with one dealer or adviser, you may want to discuss options for a consolidated report.
See a sample report
A number of companies and organizations have sample reports available. For one example, see the Investment Funds Institute of Canada (IFIC)’s sample Report on Charges and Other Compensation. You may also want to ask your advisor for a sample of what your report will look like before you receive it.
Scholarship plan fees
Scholarship plans often have enrolment fees payable in instalments in the first few years of a client’s investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition in the plan. New rules require scholarship planScholarship plan A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.+ read full definition dealers to include a reminder of the unpaid amount of any such fees in their annual reports on charges and other compensation.
Ask questions if you don’t understand or are surprised by the charges you see on your report.
New transparent reporting on charges and other fees will allow you to see the total cost of advice for your investments.