May I share with you a little industry secret that many financial planners want you to believe, but just isn’t true? Here it goes… not one financial planner can actually control any of the markets. Yet, many advisors want their clients to believe they can and do so. What we can control and frankly, what has a major effect on your account performance is the amount of investment fees that you are paying. Typically, your advisor can adjust these fees either for their benefit or for yours. Have you ever wondered if your advisor works for you or for Wall Street?
Every time I speak at a financial workshop or during a client meeting, I like to remind folks the most important thing they can take away from our discussion is– “It’s not how much you earn, it’s how much you keep that counts.” Fees need to be looked at in the same light as taxes–you need to pay some, but you don’t want to pay more than your fair share!
Most people wonder why then, when the markets are going up, they feel they are not participating in the full upside gain, yet feel that when the market is sinking like a stone, they are more doing worse off than everyone else. If this sounds like your situation, you just may be paying too much in fees and don’t even realize it.
Please remember that excessive fees is exactly like running into the wind with a parachute on. No matter how great you “think” you are doing, those excessive fees are really limiting your account performance. Sadly, Wall Street has devised many ingenious and crafty ways to stick it to the average investor with disclosed and undisclosed (usually never discussed) fees. Unfortunately, this practice is highly unfair to investors and is completely legal. Depending on how informed your advisor is, he or she may not even know or truly understand the full details of your investment’s fee structures.
High fees often occur within the ownership of mutual funds. Many mutual funds are loaded with layers of unnecessary fees and cost inefficiencies. One of the most common reasons mutual funds are sold are because they offer “diversification.” Not only can you be over-diversified, but you may own “Apple” shares multiple times in your portfolios different mutual funds. Doing this means you are paying multiple times for different fund managers to manage Apple for you. Totally unnecessary and costly to you.
To be clear, not all mutual funds are bad, but usually, advisors sell them because frankly, they are an easy sale and usually contain a large front end commission. A simple Google search on “the true cost of owning a mutual fund” will bring up many great articles that might in fact surprise you.
The best way to lower your fees is to have an honest discussion with your advisor about what disclosed and undisclosed fees you are actually paying. Because you’re dealing with your life savings, it’s important to only work with financial advisors who are fiduciaries, which means they are legally bound to represent your best interest at all times. To be a fiduciary, an advisor must complete extra licenses and certifications. It’s even better to work with an independent advisor who doesn’t get any extra kickbacks by recommending something that makes the advisor more money. Lastly, it never hurts to get a second opinion on the money you’ve worked so hard to earn. Making sure you aren’t paying excessive fees in your portfolio can save you thousands and potentially ensure a more secure retirement.
Michael Stevens may be contacted at email@example.com or (801) 210-2800.
Registered Representative with Allegis Investment Services LLC, member FINRA/SIPC and an Investment Advisor Representative with Allegis Investment Advisors LLC, a SEC Registered Investment Advisor. 591 Park Ave Suite 101, Idaho Falls ID 83402. Allegis and its affiliates do not offer legal, tax or accounting advice. Clients are urged to consult their own legal, tax and accounting advisors with respect to their specific situations.