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ETF vs Mutual Fund Fees Canada 2026 | MER Comparison

Updated

Fee Comparison

Fee Type ETFs Mutual Funds
MER (typical) 0.03-0.50% 1.50-2.50%
Trading commission $0-$10 $0
Trailer fees ❌ None 0.25-1.00%
Load fees ❌ None 0-5% (some)
Account fees Varies by broker Often waived

MER Breakdown

What MER Includes

Component ETF Mutual Fund
Management fee 0.02-0.40% 0.75-1.50%
Operating expenses 0.01-0.10% 0.25-0.50%
Trailer fee 0% 0.25-1.00%
Total MER 0.03-0.50% 1.50-2.50%
ETF Type MER
VFV S&P 500 0.09%
VEQT All-in-one equity 0.24%
XEQT All-in-one equity 0.20%
VGRO Balanced (80/20) 0.24%
ZAG Canadian bonds 0.09%
XIC Canadian equity 0.06%

Typical Mutual Fund MERs

Fund Type Average MER
Canadian equity 2.10%
US equity 2.20%
Global equity 2.35%
Balanced 2.00%
Bond 1.40%
Money market 0.65%

Cost Over Time

$100,000 Investment Over 20 Years

Assuming 7% gross return before fees

Investment MER Value After 20 Years Fees Paid
Index ETF 0.20% $357,000 $17,000
Avg mutual fund 2.00% $265,000 $109,000
Difference 1.80% $92,000

Annual Fee Impact

Portfolio Size 0.20% MER 2.00% MER Yearly Difference
$50,000 $100 $1,000 $900
$100,000 $200 $2,000 $1,800
$250,000 $500 $5,000 $4,500
$500,000 $1,000 $10,000 $9,000
$1,000,000 $2,000 $20,000 $18,000

Trading Costs

ETF Trading Costs

Broker Commission Best For
Wealthsimple Trade $0 Free trading
Questrade $0 ETF buys Low cost
National Bank $0 Big bank, free
TD Direct $9.99 TD ecosystem
RBC Direct $9.99 RBC ecosystem

Mutual Fund Trading

Cost Type Amount
Front-end load 0-5% (mostly eliminated)
Back-end load 0-6% (declining)
Switch fee Often $0
Short-term trading fee 2% (if sold within 30 days)

Hidden Costs

ETF Hidden Costs

Cost Impact
Bid-ask spread 0.01-0.20% per trade
Tracking error Usually minimal
Currency conversion If buying US ETFs

Mutual Fund Hidden Costs

Cost Impact
Portfolio turnover Trading costs inside fund
Cash drag Cash held for redemptions
Soft dollars Indirect costs
Performance fees Some funds charge extra

F-Class Mutual Funds

What Are F-Class Funds?

Feature Details
No trailer fee Fee paid separately to advisor
Lower MER Typically 0.75-1.50%
Availability Through fee-only advisors
Minimum Often $100,000+

F-Class vs Regular Class

Fund Regular MER F-Class MER Savings
RBC Canadian Dividend 1.72% 0.72% 1.00%
TD Canadian Bond 1.36% 0.62% 0.74%
Fidelity Balanced 2.06% 0.95% 1.11%

When Mutual Funds May Work

Scenarios Where Mutual Funds Fit

Situation Why
Employer plan Only option, get match
Financial advisor relationship Paying for advice
Automatic contributions Easy setup
Very small amounts No trading fees
Specific strategy Unique fund mandate

Making Mutual Funds Cheaper

Strategy How
Ask for F-class Remove trailer
Use index mutual funds TD e-Series 0.33-0.51%
Negotiate fees High balances = leverage
Use robo-advisor 0.50-0.70% all-in

Low-Cost Alternatives

Index Mutual Funds

Fund Type MER
TD Canadian Index - e Canadian equity 0.33%
TD US Index - e US equity 0.35%
TD International Index - e International 0.51%
TD Canadian Bond Index - e Bonds 0.51%

Robo-Advisors

Provider All-In Fee Includes
Wealthsimple Invest 0.50% ETFs + management
Questwealth 0.25% ETFs + management
CI Direct 0.35% ETFs + management
RBC InvestEase 0.50% ETFs + management

The Math on Advisor Fees

Trailer Fee Breakdown

Fund MER Trailer To Advisor Per $100K
2.00% 1.00% 1.00% $1,000/year
2.20% 1.00% 1.00% $1,000/year
1.75% 0.50% 0.50% $500/year

Fee-Only Advisor Alternative

Model Cost Transparency
Trailer (embedded) 1% ongoing Hidden in MER
Fee-only (hourly) $150-$300/hour Clear
Fee-only (flat) $1,500-$5,000/year Clear
Fee-only (AUM) 0.50-1.00% Clear

Switching to ETFs

Steps to Switch

Step Action
1 Calculate current fees
2 Open discount brokerage
3 Check for DSC/back-end fees
4 Transfer in-kind or sell
5 Reinvest in ETFs

Watch for DSC Fees

Years Held Typical DSC
Year 1 5-6%
Year 2 5%
Year 3 4%
Year 4 3%
Year 5 2%
Year 6 1%
Year 7+ 0%