Jonathan Chevreau of the National Post is known for continually pounding away on the fee issue. He had lots of ammunition this week when he got his hands on a U.S. academic study called "Mutual Fund Fees Around the World". The study, which is at the draft stage and is being circulated for industry comment, shows that Canada is the highest cost mutual fund market in the world.

Brenda Vince, President of RBC Asset Management and chairperson of IFIC (Investment Funds Institute of Canada), takes issue with the numbers and says that without higher-cost segregated funds, the numbers would be lower. That wouldn't make a big enough difference to change the story, however. And what Brenda doesn't say (because it's not under her purview) is that if all the structured products (principal-protected notes, closed-end funds, etc) were included, the comparisons might even be worse.

One of the amazing things about Canada (and the reason the stats look so bad) is how much of the market is in high-fee product. I don't know the exact number, but I think it's fair to say the market share for high-fee product is ... 'almost all'. In the U.S., low-fee fund families like Vanguard and T. Rowe Price have had more success in penetrating the market and low-cost index funds and ETF's (exchange-trade funds) are more commonplace than in Canada.

To drill down on the fee issue, I suggest we ask the question: when are we paying too much? While fees are generally too high in Canada, there are some specific situations where they're particularly egregious.

You're paying too much if ... you don't need advice. More sophisticated investors, the "do-it-yourselfers" if you will, shouldn't own high fee funds that have an advice component built in.

You're paying too much if ... you need help, but aren't getting it. Most distributors (brokers, planning firms, banks) have improved their advice offering a lot over the last 10 years. Their advisors are better trained and have more tools at their disposal. But there are still far too many cases where the client is paying for help (via a higher fee on their funds), but not getting sound, objective counsel.

You're paying too much if ... you're a steady, disciplined investor who is sticking to a long-term strategy (i.e. not making changes all the time). I would suggest that 99% of non-professional investors are not in a position to pursue "tactical" or market-timing strategies with their portfolio. They're far better off to lay out a long-term strategy and set up a portfolio to execute it. A "strategic" investor won't be making changes all the time and doesn't need to pay for on-going advice. An occasional tune-up is more than adequate.

You're paying too much if ... you're a large investor. I fully recognize that advice costs money. If a high-fee mutual fund is helping a small investor receive professional help, then it's probably not such a bad deal. Larger investors, however, would be far better to whip out their Visa card and pay for advice on an "as needed" basis. If a $300,000 investor is paying an extra 1% for advice, that's $3,000 a year. If you wanted to get a bi-annual tune-up, you could get a lot of help from a fee-only planner for $6,000. In reality, it would cost you a fraction of that.

Bottom line: There are all kinds of nuances to this issue, but in the end, Canadians pay too much for professional money management and advice (through mutual funds and other packaged products).