How Much Am I Paying For My Current Investments?

We find that very few investors know how much they are paying to own their current portfolio, and how much their advisor is compensated. This needs to change, and it is changing slowly. Often, investment fees are not transparent and not clearly understood by investors.

Advisory fees, which are fees paid to advisors for portfolio management and planning, are the most transparent. Most commonly, they are deducted from your account balance and they very clearly labeled in the transaction history and in quarterly statements.

Fund fees are typically deducted at the fund level and are deducted to construct, administer, and sometimes market mutual funds or ETFs. These fees are “priced-in,” meaning you do not see them deducted from your account balance. The best way to determine your fund fees is to search for the ticker symbol in sites such as Morningstar or Google Finance. Often times, the funds with higher fees also have poor performance.

If you have a 401(k) or other employer-sponsored plan, then plan administrative fees may also be deducted from your account automatically. These fees may or may not be transparent, depending on the plan. Typically larger plans have lower plan administrative fees, due to economies of scale.

If you own an annuity, you may also be paying more layers of fees.  Mortality and Expense (M&E fees) are fees investors pay to the issuing insurance company to administer the contract. These fees are usually not clear and you need to review a prospectus to determine them. Many annuities have “rider” fees, which are fees investors pay for a certain benefits, such as lifetime income.

Investors deserve to know how much they are paying for advice so that they can determine if they are receiving value. For a quick fee analysis, please click here.