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Layered Fees

What is 'Layered Fees'

Two sets of management fees that are paid by an investor for the same group of assets. This practice is found in many types of investment vehicles such as wrap funds, variable annuities, registered investment advisor client accounts and even mutual funds.

Explaining 'Layered Fees'

Information about layered fees in an investment product should be stated in the prospectus. Layered fees should generally be avoided by an investor because paying money managers for assets they are not directing is wasteful.

However, layered fees should be considered if there is truly a case to be made for the primary manager to add value. There are several cases where paying a layered fee can be acceptable, such as:

1. Investments in foreign companies. This is because of the higher costs and complexities in investing in these companies directly.

2. A low cost ETF or other fund purchased to provide exposure to a commodity, such as gold or silver.

3. As a hedge, such as in the case of a short fund or interest rate instrument.


Further Reading


Parent-subsidiary investment layers and audit fees
journals.sagepub.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Gender dimensions of user fees: implications for women's utilization of health careGender dimensions of user fees: implications for women's utilization of health care
www.tandfonline.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Tense layering and synthetic policy paradigms: The politics of health insurance in AustraliaTense layering and synthetic policy paradigms: The politics of health insurance in Australia
www.tandfonline.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Applying Pricing Engineering for Electronic Financial MarketsApplying Pricing Engineering for Electronic Financial Markets
www.tandfonline.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Rural Fee Reform and the Changing Relationship between State and Peasant <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-SHXJ200603001.htm' />Rural Fee Reform and the Changing Relationship between State and Peasant [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-SHXJ200603001.htm'>PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Portable information record medium having liquid crystal and photoconductive layersPortable information record medium having liquid crystal and photoconductive layers
patents.google.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Challenging Fanon: A Black radical feminist perspective on violence and the Fees Must Fall movementChallenging Fanon: A Black radical feminist perspective on violence and the Fees Must Fall movement
www.tandfonline.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …

Liability, Information, and Anti-fraud Investment in a Layered Retail Payment StructureLiability, Information, and Anti-fraud Investment in a Layered Retail Payment Structure
papers.ssrn.com [PDF]
… Download Citation. Download article citation data for: Parent-Subsidiary Investment Layers and Audit Fees. Ferdinand A. Gul, Audrey Wen-hsin Hsu, and Sophia Hsin-Tsai Liu. Journal of Accounting, Auditing & Finance 2017 33:4, 555-579. Download Citation …



Q&A About Layered Fees


What is layered fees?

Layered fees are two sets of management fees that are paid by an investor for the same group of assets.

Why would it be acceptable to pay a fee on top of another fee?

It could potentially make sense if the additional investment adds value beyond what was already offered at no additional cost; however this must always be weighed against whether the added expense is justified given all other costs associated with an investment vehicle including taxes, commissions, etc..

What should you consider when investing in a product with layered fees?

You should consider if there is truly a case to be made for the primary manager to add value.

When might investors want to invest in foreign companies directly rather than through an ETF or mutual fund which has lower expenses but also higher layers of management compensation built into its structure?

Investors may want to invest directly in foreign companies if those companies cannot easily access US markets due to legal reasons (for example) or if

Are there any cases where paying a layered fee may be acceptable?

Yes, there may be some cases where it would be acceptable to pay a layered fee such as investments in foreign companies, low cost ETFs or other funds purchased to provide exposure to commodities such as gold or silver, and as a hedge such as in the case of short funds or interest rate instruments.

How can you avoid layered fees?

Avoid layered fees by being aware of them and avoiding products that have them.

How does paying money managers for assets they are not directing waste your money?

Paying money managers for assets they are not directing wastes your money because it is inefficient and unnecessary.

What can you do with layered fees?

You can pay money managers for assets they are not directing.