Mutual fund and ETF investment management fees have declined steadily in the last decade, according to a new study by Morningstar Canada. The firm’s 2025 Canadian Fund Fee Study reports that on a simple average basis, fees are down 22 basis points. They’re down seven basis points on a weighted average basis.
“Investors want cheaper strategies, and fund companies have delivered,” writes Michael Dobson, manager, research analyst in his report. “Price matters. Cheaper funds took in more flows than expensive ones and were less likely to close over the period examined.”
Indeed, the less expensive half of funds have earned 72% of inflows since 2015, and held 69% of assets. Among passive funds, the numbers are 93% and 83%, respectively.
A pair of regulatory developments drove this, at least partly — the 2016 Client Relationship Model Phase 2 and 2022 client-focused reforms. Expect that to continue as total cost reporting (TCR) rolls out.
“Greater fee transparency should lead to better and more informed decisions for both investors and advisors,” Dobson said in an interview. “All investors should know what they’re paying for their funds.”
No one’s going to argue that. But is an unintended consequence brewing in all of this? Post-TCR, will investors become so focused on fees that they shy away from well-suited investment options simply because of a higher price tag?
Some will. It’s up to advisors to navigate this.
“I would agree to a certain extent,” Dobson said. “Fees should not be the only thing that investors consider. It is very important, though.”
The best practice will be to talk about fees without focusing solely on the lowest-cost options. Morningstar has fee data you can reference, so you’re presenting management-expense-ratio (MER) benchmarks in a similar way to performance benchmarks.
Advisors should be comfortable saying “this is a really good strategy, but it is more expensive,” Dobson said. “That leads to better outcomes for investors. The more they know, and the more fees are part of that conversation, the better. It’s on the advisor to have those conversations and to understand each client’s unique situation.”
I also asked Dobson how the fees Canadians pay compare to their counterparts in the U.S.
“Canadians hold a lot in commission-based share classes, which have a higher stated MER,” he said. “So, if you consider them into the equation, it looks like we’re paying more than Americans do for their funds. If we look at unbundled share classes, however, and what Canadians are paying just for their funds, that gap closes significantly. It’s still there, it’s just not as egregious.”