Mutual Funds and Deferred Service Charges

Over the past two weeks, I have opened a fair number of new accounts, which primarily have mutual fund investments in the client’s portfolio.

We analyze the various funds but also research to see if the client had paid an upfront commission or if he/she will be charged a commission upon selling the mutual fund.

Our clients are amazed to hear that they will have to pay a commission (or deferred service charge) of 4 or 5% even though they have owned the fund for three or four years. Below is a chart showing the commissions, which will be charged by the mutual fund companies if you liquidate your investment within a certain number of years.

YearCIFidelityMackenzieSun Life
7 +0.00%0.00%0.00%0.00%

You are, under certain circumstances, allowed to redeem 10% of your holdings annually and not incur any charges. You can also switch from one investment to another within the same mutual fund family. However, you cannot switch to F shares, which incur lower management fees.

Keep this in mind if and when you invest in more mutual funds. At Haworth Partners, we keep fees to a minimum. We will never recommend a deferred service charge fee and our front load commissions are capped at 0.0025% or $25, whichever is greater. We will analyze your portfolio, explain your investments and recommend any changes, which will be a better fit for your risk profile.

Give us a call at 647-409-4088. We would be delighted to share our insights with you.