Management Fee
The management fee (as shown in the diagram below) includes two components:
The fee paid to the investment manager: Pays for professional investment management, supervision of the fund, administration of fund operation and service support.
The trailing commission paid to an advisor: Fund companies pay ongoing fees (known as trailing commissions or trailers) to the firm for which your advisor works. A portion of the trailing commission is sometimes paid to be the advisor’s firm to its representatives.
The value-added activities that you advisor provides in exchange for the trailing commission can be summarized under three pillars:
1. SERVICE
Encompasses a wide range of activities, including account openings/closings, reporting and issuance of quarterly account statements and client communications, and regulatory compliance activities.
2. ADVICE
Represents the expertise an advisor provides to clients. This expertise can include fund recommendations and portfolio construction; ongoing monitoring and portfolio re-balancing; and retirement, tax or goal-specific planning.
3. ACCESS
Includes the infrastructure required of your advisor’s firm to support the distribution, sales and servicing of all types of investments.