Trailer Fee

Seeing the same commercial over and over for a movie we don’t want to watch really grinds our gears. “We should get paid every time we have to sit through this dumb movie trailer,” we complain to our friend through a mouth full of pizza. “We should get a fee...a trailer fee.” After asking us to please not talk with our mouth full, our friend informs us that “trailer fees” are already a thing, and they have nothing to do with movie trailers.

A “trailer fee” is a commission that a broker receives for recommending certain investment funds to his or her clients. The fee is paid by the firm that manages the fund, which gives some critics conflict-of-interest-related indigestion. After all, how can a broker say they’re acting in the best interests of their client when they’re collecting a commission for getting them to buy certain products? But trailer fee fans say there’s no conflict of interest to see here. Fund prospectuses have to disclose any trailer fees they pay out, so it’s not like there’s some secret, hush-hush, backroom bribery going on. Besides, the fees aren’t huge—1% of the value of the investment is pretty much the max—which isn’t that big of a deal, right? Eh...1% of a $100,000 investment is still a thousand bucks...but regardless, we want to check the fine print on our own mutual fund investments. After we eat some more pizza.