What is a 'Trailer Fee'

A trailer fee is a fee that a mutual fund manager pays to a salesperson who sells the fund to investors. The trailer fee pays the salesperson for providing the investor with ongoing investment advice and services. The trailer fee is paid to the advisor annually for as long as the investor owns the fund. The trailer fee is also known as a "trailer commission."


A trailer fee is one of many fees withheld by a mutual fund for management. Mutual fund fees are charged for various reasons. Investor transactions are often associated with a fee. Mutual fund investors will typically be charged a fee when they purchase, exchange or redeem mutual fund shares. Other fees, including the trailer fee, are associated with the mutual funds overall operating costs. Other expenses associated with operating the mutual fund include investment advisory fees, marketing and distribution expenses, brokerage fees, custodial fees, transfer agency fees, legal fees and accounting fees.

If a mutual fund charges a trailer fee it will be detailed in the mutual fund’s prospectus and included in the mutual fund’s total management fee. Mutual fund’s must provide full disclosure of all fees charged by the fund. A mutual fund’s management fee is typically displayed with the characteristics of a fund on its marketing collateral.

It may be important to know whether your mutual fund salesperson is receiving a trailer fee. Trailer fees are somewhat controversial and have been debated because of their potential to cause conflicts of interest. An advisor choosing between two mutual fund offerings, could potentially favor a mutual fund offering with a trailer fee over one without because of the annual compensation they would receive while an investor is invested in the mutual fund. If a mutual fund has a trailer fee, it typically ranges within 0.25% to 1% of the mutual fund’s expenses. Clearly understanding a mutual fund’s targeted objectives and fees can help an investor ensure they are choosing the best investment for their personal needs.

Understanding a Mutual Fund’s Fee Schedule

Investment companies are required to provide full disclosure of all fees charged by a registered mutual fund offering. These details can be found in the mutual fund’s prospectus, often under the heading “shareholder fees.”

An example of the reporting of trailer fees can be found in a prospectus from Russell Investments: Russell Investments Simplified Prospectus.

The Russell Investments Simplified Prospectus details which funds pay a trailer fee. Details on trailer fees begin on page 40 and are delineated by fund series and purchasing option.

  1. Trailer Interchange Agreement

    A trailer interchange agreement is a contract that arranges the ...
  2. No Transaction Fee Mutual Fund

    A no transaction fee mutual fund is a mutual fund with no associated ...
  3. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
  4. Constructive Total Loss

    A constructive total loss is when the cost for repair of an item ...
  5. Redemption Fee

    A redemption fee is a fee charged to an investor when shares ...
  6. Fee

    A fee is a fixed price charged for a specific service and is ...
Related Articles
  1. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  2. Investing

    How to Buy Mutual Funds Online

    Learn how to buy mutual funds online. Discover which websites offer mutual fund trading services, how to choose a fund and typical fees.
  3. Investing

    Everything You Know About Investor Fees

    Investment fees are one of the main determinants of investment returns, and over time, minimizing fees tends to maximize performance. Use this guide today.
  4. Investing

    12b-1: Understanding Mutual Fund Fees

    Many mutual funds charge investors a 12b-1 fee to pay for marketing and promotion expenses.
  5. Investing

    Trading mutual funds for beginners

    Learn the basics about mutual funds, including the types of strategies available and the different fees they may charge.
  6. Trading

    Fund Costs and Expenses

    How much a fund charges for its services is the most important indicator of how well it will perform.
  7. Investing

    If You Invest in Mutual Funds, Read This

    If you invest in mutual funds, you may be paying investment expenses that don't appear on your statement.
Trading Center