Fee Deductibility

Are your investment advisor’s fees tax deductible?

When we meet an investor for the first time, one question we often ask them is what fees they pay for the management of their investments.  Most people don’t actually know the correct answer, some claim they’re not paying any fees at all, and a few are afraid to find out.  In any case, whether it’s through one-time commissions or hidden management expense ratios (MERs) charged by mutual funds on a recurring basis, the fact of the matter is that there are many ways advisors and firms are compensated for the advice and services they provide for their clients.  Even those who manage their investments themselves may be paying more than they think.

Richardson GMP has been striving to provide a transparent approach for advisors and their clients in the form of fee-based accounts since our inception.  These accounts explicitly show the fee being charged to your account on a regular basis.  Why is this important?  First of all, we believe that knowing how much you pay for a product or service, including investment advice, is an important part of the decision making process.  Also, some transparent fees may be deductible on your income tax return which can return significant cash to your wallet.  Your investment advisor is being compensated in some way so why not have the federal government cover a portion of the bill?

Many of our clients take advantage of Paragraph 20(1) (bb) of the Income Tax Act which allows them to deduct fees, other than commissions, paid for the administration and management of their investments. In order to qualify as deductible, the fees must be paid by the client to a person whose main business is advising others on securities transactions and the fee must be reasonable for the time and type of work involved.  Fees paid for general financial advice, such as a retirement plan, are not deductible because the fees are not specifically for advice or management of your investments.

Are your advisor’s fees tax deductible? If so, ensure you’re not missing out this tax season and provide your accountant with the appropriate information along with the rest of your tax slips.  All clients should consult their tax advisors for advice on matters relating to their income tax return and deductible expenses.

 

If you don’t know what you’re currently paying in fees and would like to find out, give us a ring at 204-953-7850 (toll-free 1-866-205-3549).

 

Jeremy and Trevor, in partnership with the Bradet-Simpson Investment Group at Richardson GMP, work hard to develop focused strategies to meet the unique needs of today’s investor.  Richardson GMP is Canada’s leading independent wealth management firm, supported by expert tax and estate planning professionals.

If you have questions, feedback or topics you would like us to write about, please contact us.

 

This material is provided for general information. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances.  Before acting on any of the above, please seek individual financial advice based on your personal circumstances.  However, neither the author nor Richardson GMP Limited makes any representation or warranty, expressed or implied, in respect thereof, or takes any responsibility for any errors or omissions which may be contained herein, or accepts any liability whatsoever for any loss arising from any use or reliance on this report or its contents. Richardson GMP Limited is a member of Canadian Investor Protection Fund. Richardson is a trade-mark of James Richardson & Sons Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.