Understanding Hidden Fees in Investment Accounts

Wall Street's hidden fees are crippling your investment returns ...and you'll never see them on a statement. 👉 I'm talking about the "expense ratio" of your funds. Loading clients up with high-fee funds is a sneaky way some companies extract more money. This is a common practice at the "big box" firms. If your advisor at XYZ Investments has you in a portfolio full of XYZ funds... Your Spidey sense should start tingling! 🧠 "Are they really working in my best interest?" ------------- ➡️ Here's how to audit your portfolio fees: Google the 5 letter ticker symbol for each fund and see what comes up for expense ratio. For example - this fund has an expense ratio of 1.3% which is SKY HIGH. - If the fund gains 10% in a year, you get 8.7%. - If the fund loses 10% in a year, you lose 11.3%. 💡 Best practice is to keep expense ratios below 0.3%. This fund is over 4x that expensive! That earns it a 💩💩💩💩 rating. ------------ BUT WAIT - THERE'S MORE! This fund steps up to a 💩💩💩💩💩 rating because it also comes with a 5.25% front load. What's that mean? If you put in $100, only $94.75 actually gets invested. You lose 5% right off the bat as a sales charge. And then the ongoing expense ratio kicks in. Crazy, right? As John Bogle said, "Fund performance comes and goes. Costs go on forever." Cost is one aspect of investing you can control. How much are you losing to hidden fees every year? 🤔 Let me know if you need help figuring it out. 📨 ------------ I'm Allen Mueller, a financial advisor who helps Aerospace & Defense professionals build wealth, win the tax game, and make work optional. + Follow and hit that 🔔 for more personal finance content! + DM me 📨 or visit my website to book a complimentary meeting. ------------ **This post is general education, not financial advice.**

"Let's muddy the waters to make it look deep." 👀 I recently reviewed a portfolio where the current advisor wasn't generating "alpha" but instead had created an alphabet soup of different complex investment products and strategies. When I read through all the fine print 🔬 I uncovered over 👉 $100,000 👈 of annual fees and commissions being charged to the client. 👇 Here was the alphabet soup I found all within the overall investment portfolio. A = A-shares with a 5.75% up front sales commission B = Business Development Corporation (BDC) with a 10% sales commission. C = C-shares with a 1% up front commission with a trail and internal operating expenses on the share class of this private fund of over 4%. D = Defined Risk Fund, an expensive actively managed mutual fund that was underperfoming it's benchmark that was overlayed with an options strategy H = Hedge Fund with a 2% annual management fee and a performance fee on top. Fund had underperformed the benchmark net of fees since inception. L = L-shares with a 4.25% sales load on another share class of a private fund. N = Non-traded REIT, there were multiple where the share prices and distributions have been cut and the liquidity provisions for withdrawing funds have been limited. P = P-shares, I had never even heard of these in all my years as an advisor, but after combing through the prospectus they had some sort of extended back end sales charge. S = Surrender charge, annuities aren't all bad but these had 10 year surrender periods and it was hard to figure out where these specific contracts fit in their plan. T = Third Party Money Managers, there were multiple managers using proprietary funds which brought the total costs when added on to the advisory fees of over 2% for these accounts. U = Unit Investment Trust, this was basically just an expensive version of an ETF that had a commission built into it. Ten years working in broker dealer world gave me a understanding of how a majority of these products work and I'm now working side by side with the client to help them with 🕸 untangling the portfolio. #investing #financialplanning #retirement

Fees are insidious because the quietly drain your wealth without you noticing. When I personally look at my own investments, I think, "hey, that's pretty good!", because all I can see is the green part. The red part is what could have been, but it's invisible. That's why it's important to be vigilant about the fees that are being charged to your investments. And those big red slices are why I'm always banging the drum of "low fee index funds". Whenever I post something like this I hear someone say "Stop fear mongering, no one is being charged 2%". Here's a little story in response. Last week someone reached out to me and asked if I could help identify the fees they were being charged. They sent me a statement for a brokerage account with about $20,000 in it. Here's what I found. The $20K split across NINETEEN different actively managed mutual funds. The weighted average of those expense ratios was 0.6%. Not HORRIBLE, but not great. But that's not the end. This individual investor was ALSO being charged a quarterly management fee. On an annual basis it added up to 1.38%. Add those together and you get total annual fees of 1.98%. (And don't get me started about the tax inefficiency and underperformance they can expect from the bevy of actively managed funds in a taxable account). The above story isn't a case of outlandish and unusual fraud. It's the status quo for many investors who stumble into a financial advisor's office who offers to manage their investments for them. And you can see by the chart how devastating (yet invisible to the investor) the fees can be. What do you? Learn to invest on your own. No one will care about your money as much as you. And if you do want to talk to an advisor, find an advice-only advisor who doesn't manage your investments for an annual fee. Rather they help you set up your investments and provide advice for a flat fee. p.s. This is why we started Nectarine! To connect investors with advice-only advisors. Link in bio! As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often. -Jeremy #fees #bogleheads #piechart #investments #money

Every week I speak to people about money Here’s a dangerous truth… Most of them invest in their 401(k), which is great The problem is they don’t know what they’ve invested in And more importantly they don’t know how much it costs Most people treat their 401(k) as the holy grail of retirement savings. But no one tells you about the hidden costs: Each year we’re paying various fees The total ends up being around 1% of assets Here’s how this works: 1% on $100,000 ends up costing $1,000 a year One of the best fees you can reduce is called the expense ratio Each ETF has one (ETFs is what most people invest in) The highest is 13.94%. The lowest is 0.00%. The average is 0.15%. At 0.15%, you’re paying $150 on a 100k portfolio The other fees are fixed and vary depending on the company that manages your 401(k) The fees are opaque The cost over 30 years is confusing Here's what this means in practical terms. Assuming you have a 100,000 401(k) It grows 6% a year And the total fees are 0.9% You’d have spent $129,634 in fees Your total account value would be $444,715 For many, this feels like 29% went to fees And for most of us, we don’t know our numbers So we don’t know how much we actually pay (Data from human interests) The good news is we have other retirement options Like Self-Directed IRAs (SDIRAs) With an SDIRA, the fees are either fixed or based on portfolio value (usually ~500/yr) It’s disclosed before you set up your account And you can invest in assets outside the stock market These accounts are common People love to use them for real estate It enables them to make money and delay taxes It’s a win-win If you have a 401(k) that isn’t growing One where you’re not sure how much you’re paying in fees Or if you’re just looking to learn more Comment or DM.