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Freelance writer Kerry Taylor at her country home in Vernon, B.C. on May 25, 2010. She has captured first place among personal finance blogs. Squawkfox bills itself as a blog "where frugal living is sexy, delicious and fun."

Jeff Bassett

Kerry Taylor was in her 20s and just starting to save for retirement when she bought into her company's group plan, becoming the proud owner of a mutual fund portfolio. Like most people, myself included, she knew very little about obscure things like financial fees. Because she never wrote any cheques to her adviser and her financial statements did not tally up any fees, she assumed she wasn't paying any.



Still, something in her gut was telling her it was all too good to be true, and after stumbling upon an article about financial fees, the young Ms. Taylor decided to do some financial sleuthing. "What I found out, it made me sick to my stomach," she said in an interview.



It turns out Ms. Taylor was shelling out "a smorgasbord of fees" that were quietly devouring her savings. Not only was she paying almost 2.5 per cent in management expense ratios (MER), but all of her funds had deferred sales charges (DSCs), or back-end loads.

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She discovered that the MER, an administrative or management fee, is paid regardless of whether your fund makes or loses money. But it was the back-end load, which would have slapped her with a large fine had she sold her fund before a prescribed number of years, that really set her off. "I felt totally stuck. I had to wait a couple of years, take out a little bit at a time and wait the rest of it out. I never made that mistake again."



In a post on her popular Squawkfox blog, the now-savvy financial writer goes over the fees that impact a mutual fund portfolio: the MER and the DSC, acronyms that mean nothing to many Canadians, as well as the front-end load, the annual account fee and trading costs or commissions.



Of course your financial adviser or fund company are providing you with a tangible service and deserve to be compensated. The point Ms. Taylor makes in her often humourous blog post is that each and every fund owner needs to be pro-active in finding out how much they are being charged in fees and then decide if that is something they are comfortable paying.



Still not convinced this is something you, as a mutual fund owner, should look into? Ms. Taylor does a little number-crunching and finds that someone who has invested $25,000 over 25 years and managed a return of 4 per cent who pays 1.3 per cent in fees has handed over $11,393. Someone who pays 1 per cent less at 0.3 per cent has forfeited just $3,000 in fees. That, she concludes, is the price of 1 per cent.



The thrifty Ms. Taylor, 37, is now a firm believer in the do-it-yourself school of investing and on keeping her costs firmly under control. She blames herself for not doing more research into mutual fund fees before she invested, but says disclosure rules in Canada are weak. She believes monthly or annual financial statements should clearly show the total fees as paid in dollars, rather than as a percentage of the fund.

"As a regular Canadian, I did not know who or what to ask. I hired someone with credentials and I trusted them," she said. "My No. 1 rule now is if I don't understand it, I don't buy it."



Ms. Taylor's advice is simple: Ask your financial adviser and fund company how much you are paying in fees. Other places to access fund information are with Morningstar, the SEDAR search tool, and if you are American, the U.S. Securities and Exchange Commission's search tool, where you can look up mutual fund prospectuses. If you are someone whose head spins at the though of math, Ms. Taylor links to some handy calculators that can help you calculate how much you are paying in fees.

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