mer = Total sales revenue (over Specific time) / Total MARKETING spend (over the same period, across all channels) Here's a brief example to demonstrate the calculations. Therefore, your MER for 2022 was $3,210,000 / $658,000 = 4.75 or 475%.
The calculation is simple. Total revenue divided by total ad spend. Similar to ROAS, MER is expressed as a ratio. $15k in revenue on $5k in spend equals an MER of 3.0.
Management Fees
The total percentage of the MER may depend on factors such as the size and success of the fund. The fee typically falls somewhere between 0.5% and 2% of the invested assets.
It's worth noting that MER fees do not have to be paid separately by the investor; they're deducted annually from the fund and reflected in the fund's daily net asset value (NAV).
The MER is the total of the management fees, operating expenses and taxes, and is deducted from the fund's annual return. Fees can vary greatly, so it's smart to look into each fund's MER, alongside performance projections.
Bottom Line. A 1% annual fee on a multi-million-dollar investment portfolio is roughly typical of the fees charged by many financial advisors. But that's not inherently a good or bad thing, but rather should hold weight in your decision about whether to use an advisor's services.
Management fees, whether paid as a mutual fund expense ratio or a fee paid to a financial advisor, typically range from 0.01% to over 2%. Generally, the range in fee amount is due to management strategy.
For example, a fund with a 1% management fee will charge $1,000 annually for every $100,000 of AUM. The MER or expense ratio represents the total cost of managing and operating a fund and is given as a percentage of the fund's total assets. It includes the management fee and a broad range of expenses.
Understanding Management Fees
Management fees can also cover expenses involved with managing a portfolio, such as fund operations and administrative costs. The management fee varies but usually ranges anywhere from 0.20% to 2.00%, depending on factors such as management style and size of the investment.
How do MERs work? The MER is expressed as an annualized percentage of daily average net asset value during the period. For example if a fund's MER is 0.78%, this means the fund incurs annual costs of $78 for every $10,000 invested in a given year.
Calculating MER
As an example, say your last marketing campaign generated $10,000 in revenue from a $5,000 ad spend: You divide $10k by $5k (total revenue by total ad spend) That gives you an MER of 2 (10,000/5,000 = 2) We can express this total as a ratio, meaning MER in this example is 2.0.
In summary, if you're paying for an actively managed fund at a bank branch where you receive support from a financial advisor or planner, you can expect to pay an MER of 1.8% or more. If you open a brokerage account and invest directly in a passively managed ETF, you can expect to pay an MER of roughly 0.25%.
Management Expense Ratio (MER) Calculation
The MER is the percentage of the annual fees plus the annual expenses, divided by the average net assets of the fund. Typically, MERs in Canada are below 3%.
Aim for a “good MER” of 0.25% to 0.75% by investing in ETFs and using a private investment management firm to manage your portfolio.
The value is annualized by multiplying the monthly average by 12, according to the following formula: (Monthly EOB domestic shares traded / Month-end domestic market capitalization) x 12.
A Management Expense Ratio (MER) represents the costs associated with owning a mutual fund. It indicates how much a fund pays in management fees and operating expenses (including taxes) on an annual basis. MERs are expressed as a percentage of the daily average net assets during the year.
Note that mutual fund management fees are different from management expense ratios (MERs), which are not tax deductible.
In the pre-investment due diligence phase, management fees represent the largest estimable cost. [1] Therefore, they are an excellent candidate for negotiation.
Industry standards show that financial advisor fees generally range between 0.5% and 1.5% of AUM annually. Placement of a 2% fee may appear steep compared to this average. However, this fee might encompass more comprehensive services or cater to more unique, high-maintenance portfolios.
One of the main drawbacks of managed funds is the management fees and other associated costs. These fees can eat into returns, especially in years when the fund's performance is weak. It's important for investors to weigh these costs against the potential benefits of professional management.
While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.
The management expense ratio (MER) represents the combined total of the management fee, operating expenses and taxes charged to a fund during a given year expressed as a percentage of a fund's average net assets for that year. All mutual funds have a MER.
Management fee: This fee is what you pay to the fund manager or the team of investing professionals who make sure the fund achieves its investing objective and performs well. Typically, this fee falls between 0.5% and 2% of the assets being managed.