Pricing
The total cost of Frontier Financial’s portfolio management service reflects two separate parts:
a) the underlying portfolio components’ cost, also referred to as the product fee, and
b) Frontier’s advisory fee
a) the underlying portfolio components’ cost, also referred to as the product fee, and
b) Frontier’s advisory fee
Product Fee
Each investment vehicle or fund in Frontier’s portfolios contains a built-in cost, its Management Expense Ratio (“MER”), which is charged by its manager to the fund’s assets. MERs are typically expressed as a percentage of assets and include all applicable sales taxes.
A fund’s after-fee return is reduced on an almost one-to-one basis by its MER. For example, a mutual fund with a pre-fee return of 8% for the year and an annual MER of 1%, will have an after-fee return roughly equal to its 8% gross return less its 1% MER, or 7%.
The annual product fees for Frontier's primary model portfolios are shown in red in the table below. The product fees reflect the portfolios’ current holdings and weights, and may change if Frontier alters those holdings. The table also shows each portfolio’s current target stock weight.
A fund’s after-fee return is reduced on an almost one-to-one basis by its MER. For example, a mutual fund with a pre-fee return of 8% for the year and an annual MER of 1%, will have an after-fee return roughly equal to its 8% gross return less its 1% MER, or 7%.
The annual product fees for Frontier's primary model portfolios are shown in red in the table below. The product fees reflect the portfolios’ current holdings and weights, and may change if Frontier alters those holdings. The table also shows each portfolio’s current target stock weight.
Frontier Advisory Fee
Frontier receives no compensation from its portfolios’ underlying investments. Instead, Frontier charges an advisory fee directly to client accounts. This advisory fee also includes the custodial fee which pays for trade execution, record keeping and reporting performed by the client accounts’ custodian. Frontier’s annual advisory fee for accounts of up to $1 million in assets is 0.50%, excluding GST, and is shown in blue in the table below.
Each portfolio’s total annual cost, in purple in the table’s last row, includes its product fee in red, the Frontier advisory fee in blue, and GST on the advisory fee.
Each portfolio’s total annual cost, in purple in the table’s last row, includes its product fee in red, the Frontier advisory fee in blue, and GST on the advisory fee.
Total Costs Compared
How do Frontier’s total costs compare to its competitors’? Series A mutual fund MERs include both a product fee and an advisory fee*, and so are directly comparable to the Frontier portfolios’ total cost. Against their equity weights on the horizontal axis, the chart below shows on its vertical axis the most recent annual MER of the Series A (or equivalent) mutual funds in more than sixty portfolio programs. The dashed line relates the typical fund’s MER to its stock weight, as most programs’ MERs rise along with their equity content.
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Frontier’s cost advantage compared to the typical Series A mutual fund is nearly 1% per year for its most conservative portfolio, and increases to about 1.7% per year for the most aggressive portfolios. Our costs on amounts above $1 million are also extremely competitive. Do low costs alone guarantee superior investment performance? They do not, but they certainly tilt the odds in the investor’s favor. The Topics Library’s Costs/Fees section discusses costs’ impact on investment performance in more detail. |
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Mutual fund MERs and asset mix data provided by Morningstar. Data missing from Morningstar is obtained from fund regulatory filings via SEDAR. Fund MERs are from 2021 if available, otherwise from 2020.
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Why are Frontier’s total costs so much lower than its competitors'? We think a better question is, why are its competitors’ costs so high?
*The fund manager of a Series A (or equivalent) mutual fund pays compensation to the advisor’s firm for the advisory services the firm provides to the funds’ investors. These payments are known as trailer fees or trailing commissions.
*The fund manager of a Series A (or equivalent) mutual fund pays compensation to the advisor’s firm for the advisory services the firm provides to the funds’ investors. These payments are known as trailer fees or trailing commissions.
