Chapter 16 Flashcards
Front-End Load
Paid upon purchase also known as Acquisition Fee
Back-End Load
Paid upon redemption. Also known as Deferred Sales Charge
Management Fees
Deducted from the fund’s return pay for professional management and administrative services provided
Trailer Fees
Annual based fee based on a fixed % of assets
Transfer Fee
When investors want to switch investments under the same fund manager
Frequent Trading Charge
Discourage investors from redeeming soon after purchase.
Trustee Fee
Administrative fees for plans like RRSP, RRIF, RESP
Set-Up Fee
One time fee the first time purchasing a mutual fund
Account Closing Fee
When investors close their mutual fund accounts
Factors Affecting Management Expense Ratio: Types of Assets Managed by Fund
Money managers who primarily invests in Canadian T-Bills has a less complex job (less fees) than one who invests in foreign equities (more fees)
Factors Affecting Management Expense Ratio: Size of Fund
Portfolios with fewer assets are relatively more expensive to run than well established large funds
Factors Affecting Management Expense Ratio: Manager of Fund
The MER of a fund managed by a sub-advisor will be higher than a similar fund run by an in-house management team
Factors Affecting Management Expense Ratio: Trailer or Service Fees
Paid to fund distributors that allow them to serve existing clients and not just concentrate on new sales
Trading Expense Ratio (TER)
The proportion of a total fund’s assets traded in a year
Pre-Authorized Investment Plan
Offers investors the ability of making automatic and periodic purchases of units of a particular mutual fund
Voluntary Accumulation Plan
Allows investors to specify the amount and timing of the periodic investments
Systematic Withdrawal Plans: Fixed-Dollar Withdrawal Plan
Clients request to receive a periodic fixed amount of money through redemption of units of their mutual fund
Systematic Withdrawal Plans: Ratio Withdrawal Plans
Clients may request to receive a fixed % of the fund value
Clients will technically never fully exhaust their mutual fund investment on this plan
Systematic Withdrawal Plans: Fixed-Period Withdrawal Plan
Client will receive money over a period of time until the mutual fund is paid out
Systematic Withdrawal Plans: Life Withdrawal Plan
Similar to the Fixed-Period Plan except the period selected id the expected lifetime
Systematic Withdrawal Plans: Annuities
A contract between a client and life insurance company. Client gives a certain amount of money and the company agrees to make regular payments over a certain period
Management Expense Ratio (MER) Calculation
Annual total of all fees and expenses / average net assets
Offering or Purchase Price Calculation
NAVPS / 100% - Sales Charge
Income Tax Payable Calculation
Dollar per share of Capital Gains x 50% x Marginal tax bracket = Income Tax Payable
