In the first three installments of this blog series on Hidden Fees, we covered advisor fees, mutual fund fees, and performance fees. After reviewing the different types of hidden fees, it raises the question: Is there a better way?
Using the annual investment advisor fee schedule above and assuming average annual mutual fund costs, it’s not hard to see that investors could be paying 1.50-2.00% annually. That doesn’t even factor in any loads or other fees associated with the funds. If you start with $100,000 and pay a 5% load, you’re starting with $95,000. You’ll continue to be charged roughly 2.00% per year. If that’s the case, you’ll need consistent returns for many years to justify the investment. However, markets have shown that up isn’t the only direction, thus markets move sideways and down.
An alternative approach is investing with an AUM fee only advisor. What does that mean? They are charging the annual fee based on assets under management. Depending on the advisor, the services offered will differ, and there could be additional fees for some services, but in general, you’ll be assessed one type of fee each year. This is a more cost-effective approach to investing with a financial advisor.
Additionally, when you remove fund loads (commissions) from the discussion, a conflict of interest is removed. In this case, an advisor is placing client money into a mutual fund because it’s a prudent and suitable investment instead of potentially being influenced by their own financial incentive of making more income from the “commissions” paid by the mutual fund company. This will make for more objective advice that’s transparent and in the client’s best interest.
The TS Prosperity group is an AUM fee-only advisor. TSPG charges that percentage annually based off the value of a managed account. We are not required to charge this way, but we do, because we believe in disclosing exactly what is being charged with full transparency.
For an in-depth look on this subject, download our white paper on Hidden Fees, click below to download!
About TS Prosperity Group: We want to be your partner in creating a plan that secures and empowers your financial prosperity, while giving you the ability to care for your family today and for generations to come. Contact TS Prosperity Group today by calling 844-487-3115 to schedule your prosperity planning meeting.