The Truth Banks Won’t Tell You: Mutual Funds Are Costing You a Fortune

Mutual funds are pooled investment products managed by a bank or asset manager. While the concept is simple, the fees are not — and that’s exactly why big banks love them.

Most Canadian mutual funds still charge:

Meanwhile, similar ETF exposure costs 0.05%–0.25%. That’s almost 2% taken away from your profit. That’s years of hard work on your part going into the bank’s pockets, or event the mutual fund salesperson.

Because high fees = high profits.

Banks report these revenues inside broad categories like “Asset Management Fees” or “Wealth Management,” keeping the real profitability hidden but very real.

✔ Predictable annual fee revenue
✔ High stickiness (investors rarely switch)
✔ Advisor compensation tied to fund sales
✔ Higher margins than ETFs

The average Canadian mutual fund fee remains ~2%. Even after two decades of pressure. That’s how poor the investor education is.

Even a 1% fee difference costs you hundreds of thousands over 30 years.

That fee drag compounds against you.

More than 85% of Canadian actively managed funds underperform their index over long periods.

You’re paying more for less.

Although some rules have changed, banks historically sold funds based on trailer commissions paid to advisors.

Even today, many bank-based advisors still prioritize:

Not because they’re better — but because they’re profitable.

Mutual funds disclose:

ETFs disclose holdings daily and fees are simple and clear.

Here is what a 30-year cost comparison looks like with a $100,000 investment and 6% market return:

Mutual funds don’t just cost more — they erase decades of growth, and add years work delaying retirement.

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Bank advisors are trained to sell high-margin in-house funds. Here are the common lines Canadians hear:

❌ “ETFs are too risky.” False. Many ETFs simply track indexes.

❌ “Our mutual fund outperformed the market.” Usually cherry-picked timeframes or survivorship bias (bad funds get shut down).

❌ “You need a professional manager.” ETFs are professionally managed — but without the harmful costs.

Behind the scenes:

✔ Bank advisors are compensated on fund sales
✔ Banks profit more from mutual funds than ETFs
✔ Sales quotas encourage pushing fee-heavy products

In 2025, mutual funds make sense for very few Canadians:

For 99% of Canadians, ETFs are objectively better.

ETFs offer lower fees, global diversification, and automatic portfolio construction. Index investing is the easiest investment strategy for any investors!

Getting started on your own is much easier than you think. The blueprint to your first $100K and more starts with these 3 steps.

This alone puts you ahead of most investors stuck in mutual funds.

If you want to build long-term wealth in Canada, avoiding mutual funds is one of the simplest, highest-impact decisions you can make.

ETFs offer:

You don’t need to pay 2% to get market returns.
You can get them for 0.20% — or less.

Mutual funds had their time. ETFs are the future.