Never assume that an investment comes without fees. GIC commissions are often hidden, and many investors do not even realize they are paying them. If you use a broker, a commission is paid to the broker and is included in the cost of your GIC. These upfront commissions are paid because the broker does not make any on-going money (aka”trailing commissions”) after the initial purchase. Be aware that if your broker charges annual fee based on the value of your portfolio, then they should not be collecting it on a GIC, or else it’s considered double-dipping.

Key Takeaways:

• Fees on financial products can be transparent or hidden, but they are always in there somewhere.
• GICs commissions are so well hidden that very few investors even know they exist.
• Advisors deserve to be paid, but you shouldn’t have to pay them twice.

“If you’ve ever wondered why you get better rates when you buy GICs directly from the issuer, rather than through an advisor or brokerage, that’s because direct-sold GICs don’t include that commission to the middleman.”

Read more: http://www.moneysense.ca/columns/ask-moneysense/why-am-i-paying-a-commission-when-i-invest-in-gics/