Web calculator reveals impact of mutual fund fees

The calculator is installed on both the web sites of both the OSC and the Office of Consumer Affairs. It tallies up direct and indirect fees such as management expense ratios, administration fees and commissions to give investors a picture of exactly what their initial investment will turn into over a given period of time using an assumed rate of return. The results are then displayed in a graph.

The purpose of the site is to give mutual fund consumers a tool by which to make informed decision about their purchases said Jack Geller, vice chairman of the OSC, at a press conference announcing the launch of the calculator.

“Most investors don’t know a lot of what they should, that’s why we think this tool is so important,” said Geller. “We’re hoping that this will get the word out that there are things that people should look at in the prospectus.”

The site boasts a FAQ about mutual fund fees, a glossary of technical terms and links to other mutual fund information. It also calculates “foregone earnings.” This is the amount investors would have earned had they not paid any fees.

Geller suspects some customers may be surprised at the amounts.

“I think we’re hoping investors will look carefully at this,” said Geller. “I hope this will establish some market discipline and perhaps MERs will come down.”

Terri Williams, communications manger for the Investment Funds Institute of Canada, also attended the press conference. She thought the calculator was a good idea.

“If it gets people to read the prospectus, that’s good. Comparing fees is an important part of choice,” said Williams.

She also sought to put forgone earnings in context.

“They’re paying fees for a service, portfolio management administration. There’s good reasons why they’re paying a fee,” said Williams.

Visit either www.osc.gov.on.ca or www.ConsumerConnection.ic.gc.ca to use the calculator.