The Hidden Costs of Investment Advice
In the July 2008 edition of Money Magazine, a column written under the pen name The Mole, who is identified as Money’s Undercover Financial Planner, provided insight on the importance of knowing the total fees associated with investing.
When you buy investments through an adviser, you pay he or she a fee. A separate set of fees, however, may be incurred with each subsequent purchase and thus eat into the returns on your investments. To get an accurate account of fees associated with all investments, ask your adviser to itemize these four expenses:
• Adviser fees. Usually a percentage of your assets, an hourly fee, a fixed fee, or commissions.
• Mutual fund annual expenses. This may include 12b-1 marketing fees.
• Fund turnover. The transaction costs incurred by a fund in buying and selling stocks. Such fees are not included in a fund’s prospectus. (Annual turnover of a fund’s stocks can is available on morningstar.com and can be used to estimate turnover costs at 0.01% for each 1% of annual turnover.)
• Insurance fees. With annuities and insurance policies, extra fees are charged to cover death benefits, administrative costs and certain riders.
If your adviser offers to send you a prospectus or stack of documents, it is a sure sign that he/she is merely trying to meet legal requirements instead of answering your question. This is a red flag and you should take appropriate action.
Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.
