Trailing Commission

A trailing commission is an ongoing fee that a mutual fund company pays to the advisor or dealer who sold you the fund. It’s not a separate charge on your statement. It comes out of the fund’s management expense ratio (MER), which means it’s quietly deducted from your returns every year for as long as you hold the fund.

How it works

Trailing commissions in Canada are typically between 0.25% and 1.00% per year, depending on the fund. On a $50,000 investment with a 1% trailing commission, that’s $500 per year going to your advisor or dealer. You won’t see it as a line item. It’s baked into the fund’s overall MER.

The idea is that the trailing commission compensates your advisor for ongoing advice and service. In practice, some investors pay this fee for years without receiving any meaningful advice at all.

Why it matters

Trailing commissions are one of the reasons Canadian mutual fund fees are so high compared to other countries. If you’re in a mutual fund and you’re not receiving regular advice, guidance, or planning from your advisor, you may be paying for a service you’re not actually getting.

If you invest on your own through a discount brokerage using ETFs or low-cost index funds, trailing commissions don’t apply. That’s one of the reasons self-directed investing has become so popular in Canada. For more on this topic, see our guide to investment fees in Canada.