Many Investors Are Unaware of Their Broker Fees
We’ve all heard the old adage that “nothing in life is free.” So, why do so many people assume that there are no fees associated with their money and investments? A recent survey conducted by the North American Securities Administrators Association (NASAA) shows that one in four investors had no idea what fees they were being charged by their brokerage firms. Additionally, it finds that about 30% aren’t even aware of any management fees or expenses.
Virtually every account that holds money has fees. These days it is tough to even find a bank account that doesn’t charge a fee. However, this survey also reveals that over 80% of investors recognize the importance of fees. That’s quite a disparity between those who feel that fees are important and those who actually know what they are paying.
First, let’s all admit that fees are important in servicing and maintaining your account. However, it’s your money so you should probably have some idea of how and what fees are assessed.
So, what to do? If you want to be bold, and I recommend that you are, ask. Ask your retirement plan representative, ask your investment advisor, ask your banker. Have them total the fees charged on your account on an annual basis. Any good financial services representative should be more than happy to do this for you. If you are little shy about it, and that’s okay too, you can also check the Activity section of your statements for a rough idea of what you are paying. It won’t include the fees associated with the actual investment, but it will give you a good idea of what you are paying the firm who holds your money. If that seems too daunting, hire an objective hourly-only advisor to calculate it for you.
Next steps. You need to decide if the value you are getting from working with that advisor (firm or account) is worth what you are paying them on an annual basis. Sometimes it is, and that’s great. Nothing hits the sweet spot better than a good financial services relationship at a reasonable fee. But what if you aren’t getting great service and figure out that you are paying quite a lot in fees? First, have a heart-to-heart with your rep. Sometimes, just letting them know that you aware of the management fees can open up a dialogue on expectations.
This step might also be the wake-up call that you need to start looking for a new advisor, firm or bank. Either way, knowledge is power and you are in the driver’s seat once you have the information at hand.