Management Fees

There are two types of Management Fees that you can model in Snap. Fund Expenses (e.g., MER, TER), which are subtracted from the gross returns before calculating investment income (e.g., interest, dividends, capital gains), and Deductible Fees (e.g., advisory fees), which are paid after returns are calculated. Deductible Fees in non-registered accounts are used to offset Taxable Income in the year charged.

These are the settings that all new Financial Assets added to the projection begin with. If you change the Management Fees here, this will not change the existing Financial Assets in the projection. You'll need to adjust existing Financial Assets directly on the Scenario Setup -> Assets -> Fees page.

If you're using the original settings, the Fund Expense Ratio is set to 1.5% and the Deductible Fee Ratio is set to 0%. This 1.5% total aligns with the average of the fee range (0.5% to 2.5%) provided by the FP Canada Projection Assumption Guidelines. This is also the most conservative split between Fund Expenses and Deductible Fees since there are no tax savings assumed. If you've saved your own Defaults settings in the past, the Fund Expense Ratio and Deductible Fee Ratio will be saved based on those Defaults. You can change the Management Fees assumptions and then select Defaults to Save current page settings for new scenarios.

2: Fund Expenses

Fund Expenses (e.g., MER, TER) are subtracted from the gross returns before calculating investment income (e.g., interest, dividends, capital gains). For instance, if you have a non-registered account with a Gross Rate of Return (RoR) of 6.6% and a Fund Expense of 1.5%, then the Net Fund RoR will be 5.1%. This 5.1% is then allocated across taxable income sources using your Portfolio Settings.

You can see the return breakdown on the individual Planning Pages by hovering your mouse over the Rate value in any year of the projection.

3: Deductible Fees

Deductible Fees (e.g., advisory fees) are paid after investment income has been calculated. The investment income (e.g., interest, dividends, capital gains) is calculated based on the Net Fund RoR of 5.1% (mentioned above). Then, the Deductible Fees are withdrawn from the account, reducing the total growth rate of the asset. If the Deductible Fees are 1%, then the Net Asset RoR would be ~4.1%. You can see the return breakdown on the individual Planning Pages by hovering your mouse over the Rate value in any year of the projection. Deductible Fees are charged based on the average account balance in the year. For instance, if the account starts at $100,000 and grows to $105,100, then the fee will be 1% of the average balance ($102,550 in this case).

The Deductible Fees for non-registered assets are added to any other Deductions for the year (e.g., tax-deductible interest expense, CPP enhancement deductions) in the Taxable Income Details table. These Deductions then reduce the client's Taxable Income.