Investment Fees – the “quick” glossary
Do you know what you’re paying on your investments? If you’ve ever looked into it closely, chances are it is so confusing to figure out that you gave up trying. Believe me, I get it.
It's important to me that my clients understand what they are paying for and the value they get for those fees before they choose to hire me, but no matter how I try to describe them, fees inevitably get complicated. Fast. I wish it were as simple as “here’s the fee we charge for everything” and quote a flat amount or percentage. However, the way the investment industry is currently setup, that isn’t really possible.
I encourage you to read the following information that covers a lot of information about How Fees and Expenses Affect Your Investment Portfolio: https://www.sec.gov/investor/alerts/ib_fees_expenses.pdf
Ok, still with me? Good. I think it gets a bit simpler from here. A few other fees to keep in mind are:
Low balance Fee:
Some investment products which this fee typically applies to:
- A share mutual funds
- C share mutual funds
- 529 plans
- Note: Many mutual funds have minimum investment thresholds, typically $1,000 or less per fund, and if your investment is less than that it could be charged an annual low balance fee
Annual reporting Fee:
Can be associated with any type of account.
- This is a fee charged per account NOT per investment. These are charged by your broker dealer to cover the cost of annual tax reporting. So even if you have 100 unique investments inside an account you still only pay one annual reporting fee.
Financial Planning Fee:
- This is separate from investment fees, but often confused with investment fees. If you hire an advisor to perform a comprehensive financial plan, there will be a fee quoted. This fee is independent of any recommendations the advisor may make and is not directly tied to that advisor managing your investments.
- Many people develop a level of trust with an advisor that develops their financial plan and will also choose to hire that advisor for their investment and insurance needs. Others prefer to make sure the advisor is impartial while making recommendations and choose to manage investments or insurance needs on their own or hire another broker/advisor. This is completely up to the client.
I hope if you read this far you learned at least something above and if you are a client and can’t remember what fees you are paying and would like to refresh your memory – please reach out to me and we’ll review it!
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. (06/20)