Investment industry regulations require open disclosure of Mutual Fund charges. Some banks are trying to skirt this requirement. As a result investors may unknowingly be paying much more than they believe! Finding the truth requires detailed research!
In late April and early May of 2025, we conducted detailed research into the
Portfolio funds available at branches of the Royal Bank of Canada (RBC). The statements made in this post are accurate as of that time.
We were able to identify 37 funds on the RBC site which invest almost exclusively in other funds. Most of the target funds are managed by RBC Global Asset Management (RBC GAM) and other subsidiaries of RBC Corporation. A very small percentage of the portfolios are invested in third party mutual funds and index funds. Together, these funds manage $159.7B CDN in total assets.
ALL these funds are managed by Sarah Riopelle and her team. Sarah is managing director, senior portfolio manager, and head of Portfolio Solutions & Platform Talent team for RBC GAM. We don't know if Sarah and her team manage additional funds beyond the 37. If there are, we believe they are unlikely to significantly alter the analysis.
According to branch marketing discussions, Sarah's team picks suitable mutual funds for your investments. These choices depend upon your goals and risk profile. For performing this service, the team charges a Management Fee which averages 1.59% across these funds. The Management Fee generates $2.535B in revenue for RBC GAM. Sarah's funds ALSO charge Management Expense Ratios (MER) averaging 1.88% across the entire portfolio! The MER adds an additional $2.998B to RBC GAM's revenue!
How Does this Impact the Investor?
MER is a published number available on websites providing investment data. It is supposed to be the total cost of running the funds on behalf of the funds' investors. A check of Morningstar and Globefund confirms that the funds' MERs are shown. The separate Management Fee is not shown anywhere. It can only be found on the funds' webpages and the Fund Fact sheets provided by RBC GAM. The photo accompanying this article is from the web page for RBF1418 - RBC Emerging Markets Balanced Fund. This smallish ($8.09M CDN) fund generated $320,000 in revenue for RBC GAM
A check on a fund market performance website shows that the fund returned 5% annually over the last 5 years. RBC GAM kept an additional 4.03% annually!
This split of fund costs into two categories appears to violate the spirit of the regulations that investors should be easily able to find the costs of their funds! It probably also violates the letter of the regulation.
A quick scan of some other banks indicates that the problem is not widespread. We call on CIRO to stop this practice immediately! Why haven't they already stopped it? Apparently because it's more important to stop the independent agents who make their living partially through charging a 3% one-time commission than to stop a 4% annual charge!
For more on the deceptive handling of MER in all Portfolios available from ALL the banks, see our articles
here and
here.
For other examples of changes we recommend to CIRO to help Canadian investors check out our
Industry Issues blog posts.
