Expense Ratio (MER) in Canada: Why Fees Eat Your Wealth

Canadian bank-sold mutual funds typically charge MERs of 1.8-2.5%. By contrast, ETFs like XEQT charge 0.20% and VCN charges 0.05%. That difference is not minor — it is wealth-defining over a lifetime of investing.

The maths in stark terms: two Canadians each invest $10,000 in their TFSA, earning identical 7%/year gross returns for 30 years. Investor A uses a bank mutual fund at 2.2% MER and ends with roughly $38,800. Investor B uses an ETF at 0.20% MER and ends with approximately $72,500. The fee difference alone costs Investor A nearly $34,000 — on a $10,000 investment.

This is why the Canadian financial literacy community — from the Canadian Couch Potato to PlanEasy and MoneySense — overwhelmingly recommends low-cost index ETFs over traditional bank-sold mutual funds. The shift has been accelerating as Wealthsimple and Questrade made commission-free ETF investing accessible to everyone.

What to look for in Canada: below 0.25% is excellent for a broad market ETF. The TD e-Series funds at 0.28-0.51% are reasonable for automatic purchase plans. Above 1.0% warrants serious scrutiny — and the typical bank mutual fund at 2%+ is almost never justified by performance.

Over a lifetime of TFSA and RRSP investing, the MER is one of the few variables entirely within your control — and moving from a 2% bank fund to a 0.20% ETF could add hundreds of thousands of dollars to your retirement.