An advisor manages a client's portfolio with $500,000 invested across various mutual funds, all carrying a 0.50% annual trailer fee. The client expects an average annual return of 6% before fees. If the advisor's share of the trailer fee is 80% of the total, how much will the advisor earn from the trailer fees on this account in one year (assuming no principal changes)?

Question: An advisor manages a client's portfolio with $500,000 invested across various mutual funds, all carrying a 0.50% annual trailer fee. The client expects an average annual return of 6% before fees. If the advisor's share of the trailer fee is 80% of the total, how much will the advisor earn from the trailer fees on this account in one year (assuming no principal changes)?

Answer options:

• $2,500
• $2,400 ✅ $2,000
• $1,800

Correct answer: $2,000

Explanation: The total trailer fee is $500,000 * 0.50% = $2,500. The advisor's share is 80% of this, so $2,500 * 0.80 = $2,000. These fees are paid from the fund's assets, not directly by the client or from the stated return.