A Wall Street Journal investigative reporter started investigating how much she paid in portfolio fees. Guess what she found?
Her investment portfolio was in ETFs and Mutual Funds and was being managed by an investment advisory firm. All she wanted to know was:
How much am I paying in fees?
She thought it was a simple question with a simple answer. Far from it!
She was paying two types of fees:
- advisory fees
- internal fees of the ETFs and mutual funds her money was invested in
$125 flat! That’s what one representative from her advisory firm said she was paying in advisory fees.
What about the internal fees of the funds she owned, she asked? Oh That!
For that, the firm representative told her to visit Yahoo Finance or Morningstar and enter each ticker to find out the individual fund fees.
By now she was angry and frustrated!
She contacted her local advisor at the same firm, who gave her different but correct information about her fees.
In a nutshell, the reporter was paying:
- 0.85% in advisory fees to the firm
- 0.55% on average in internal fund fees
A total of 1.4% of her assets were going to fees!
She then asked for a dollar breakdown of the fees for which, at the time she wrote the article, she was still waiting on!
NOTE: You can read about the reporter’s harrowing experience here.
I am not sure if your experience has been similar to that of this Wall Street Journal reporter but mutual funds and brokerages make it incredibly hard to see how much you pay in fees.
[Check out our related article on fees: How Mutual Fund Fees Eat Into Your Wealth?]
Retail brokers and mutual fund firms have done a great job hiding fees from investors. Out of sight, out of mind is the philosophy!
Furthermore, retail brokers just drown investors in a sea of numbers and overwhelm them to a point where investors give up trying to figure out fees.
Wall Street is very creative with ideas like ‘No Transaction Funds (NTF)’ where the investor doesn’t see an upfront fee in the form of commission.
All fees are out of investor’s sight and also out of their mind.
Now you can outsmart Wall Street by relying on services that help you decipher your fees.
One such service is feeX. Once you link your investment accounts, you can view the fees in aggregate with recommendations for cheaper alternatives.
At YourCapital, too, once a user links accounts they instantly see,
- alerts on high fee funds they may own
- dollar fees in aggregate and individual fund level
- charts that show how fees are expected to grow as wealth grows
- recommendations for cheaper alternatives along with savings
Here’s an example of YourCapital showing you cheaper alternatives for an expensive fund (e.g. GTSDX).
Wall Street has created so many funds that you, as an investor, can always find cheaper ETF or index fund alternatives for a high fee mutual fund....no need to pay loads or excessive fees.
Since fees can easily eat into your wealth and make the fund manager and the broker rich at your expense, it’s always prudent to figure out how much you are paying in fees.
...but the process doesn’t need to be as frustrating as the experience of this Wall Street Journal reporter.
Here's an example of how YourCapital analyzes your portfolio fees and shows you how they accumulate over time.
Please let me know if you analyze fund fees before investing in a fund and how you go about finding low fee funds.