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How Your Financial Advisor Is Compensated
 
Your financial advisor provides valuable financial advice and services to you and your family. At different stages during your ongoing relationship, he or she will work with you to create a personalized financial strategy, help you choose appropriate investments, monitor the progress of your investments and recommend changes to your portfolio as your financial needs evolve.

In return, the same as when you buy any other product or service, you are expected to pay a fair rate of compensation.
 
Understanding Fees and Commissions
 
As a client, no matter what financial products you purchase – whether it’s mutual funds, segregated funds, GICs or something else – there are two basic ways that you can pay for your financial advisor's services: through embedded fees or fee for service.
 
Embedded Fees
 
In this model of payment, an annual service fee, sometimes called a "trailer fee," is included in the overall product cost. For example, if you buy a mutual fund, a trailer fee would be paid to GP Wealth Management and your financial advisor for their ongoing account services and investment advice. This fee, based on a percentage of your assets, can range from 0.25% for fixed-income funds to 1.25% for equity funds. The service fee accounts for a portion of the total product cost that the fund manager charges you each year referred to as the Management Expense Ratio (MER). If you would like to know more about the MER for any mutual fund, check the Fund Facts Document, which provides the key details to make an informed decision and allows you to easily compare similar funds.

In addition to the annual embedded service fee, you may pay a sales commission often referred to as a Load. There are two basic types of loads: front-end loads and back-end loads.
 
    Front End Load    
    With a front-end load, you pay a sales commission (generally from 0% to 5% of the amount invested) at the time of purchase. This commission is deducted from your investment capital by the fund manager and used to compensate GP Wealth Management and your financial advisor. You can negotiate the amount of commission with your financial advisor.    
         
     
Example:
If you were to purchase, through your GP Wealth Management financial advisor, $1,000 worth of units from a mutual fund with a front-end load at the agreed-upon fee of 2%, GP Wealth Management would receive a one-time payment of $20 (your advisor would receive a pre-arranged portion of that amount) and the remainder, $980, would be deposited into the fund.

 
   
         
    Back End Load    
    With a back-end-load, also known as a deferred sales charge (DSC), you don't pay an upfront sales commission on the amount invested. Instead, the mutual fund manager pays GP Wealth Management and your financial advisor an upfront fee (generally from 0% to 5% of the amount invested) on your behalf. This way, all of your purchase gets invested and your financial advisor receives a onetime payment.    
 
   
Example:
If you were to purchase, through your GP Wealth Management financial advisor, $1,000 worth of units from a mutual fund with a back-end load, your entire $1,000 would be invested immediately, and GP Wealth Management would receive a one-time payment from the mutual fund manager of $50 (the advisor would receive a pre-arranged portion of that amount).

 
   
 
The only time you may be asked to pay any sales commission is when you sell. But the longer you hold the investment, the less you pay. And, generally the commission falls to zero after seven years. Below is an example of a typical DSC Schedule.
 
DSC Schedule*
Period
After
Purchase
Redemption
Charge
Rate
First year 5.5%
Second year 5.0%
Third year 4.5%
Fourth year 4.0%
Fifth year 3.0%
Sixth year  2.0%
Seventh year 1.0%
Thereafter NIL
10% Free Option

Most DSC funds allow you to withdraw up to 10% of your investment each calendar year without a redemption charge. This means you can take 10% of the fund value (as of the beginning of the year) and switch it to a non-DSC version of the fund. Or you can just redeem the 10% amount into cash.
 
* This is a sample DSC Schedule; refer to the Fund Facts Document for any mutual fund you are interested in purchase to obtain key information on fees and commissions.
 
Switching Between Funds
 
In general, DSC fees are not applied to switches between funds at the same fund company if the funds are purchased under the same DSC purchase option. In other words, if you own XYZ equity fund and you want to switch over to XYZ bond fund, then you should be able to make the switch without paying any DSC fees. Moreover, the original DSC schedule will carry over to the new fund.
 
How do I know which type of load is best for me? It depends on the number of years you have to invest (this is known as your investment horizon) and the flexibility you desire.

Speak to your financial advisor about which option is best for you.
 
Fee for Service
 
In this model of payment, you never pay a sales commission when buying or selling a financial product. Rather, you pay GP Wealth Management and your financial advisor an agreed-upon annual fee ranging between 0.5% and 1.25% of the amount invested. Your financial advisor will then only recommend financial products that do not have embedded fees or commissions.

The fee-for-service option eliminates the confusion of paying different fees and commissions on different products and can provide greater flexibility for managing your portfolio. As well, for larger accounts, it can result in lower advisory fees because the more assets you have invested, the less you pay in fees as a percentage of the total assets.
 
   
Example:
If you were to purchase, through your GP Wealth Management financial advisor, $1,000 worth of units from a fund on a fee-for-service basis at the agreed-upon annual fee of 1.25%, GP Wealth Management would receive an annual payment from you of $12.50 (your advisor would receive a pre-arranged portion of that amount).

 
   
 
Signature Service Account
 
GP Wealth Management offers a comprehensive and flexible fee-for-service account. Speak to your financial advisor to discover how a Signature Service Account could benefit you as an investor. You can also obtain information on Signature Service Account by clicking the link below. 
 
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