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Who is Paying Your Investment Fees?

The other day I met with a long time client and we were talking about some of her early investing experiences. She told me she started at a local bank and they offered her investment management services. She happily accepted and for years she thought it was a complimentary service provided by the bank and reminded me that she didn’t realize there were fees associated with her investing until our first meeting.

For those who are investing alone or with an advisor, know one thing- there are fees associated with your investing and more importantly, those fees can differ greatly based on where you are investing.

Where to find information on the cost of your investments

1. Prospectus– That little (or big) book which comes in the mail. You probably throw it away- besides it does not have any photos and the paper is cheap. I completely understand.
2. Morningstar.com, Yahoo! Finance, Google Finance, or finra.org/fundanalyzer.com

If you know the “ticker” of your investment (it’s usually a 3 to 5 letter code), you can enter it in the search box and come up with a wealth of information. I think Morningstar is the easiest to find basic expense information. But if you want to dig deeper (and maybe get overwhelmed), check out the FINRA website- it’s a quant geeks dream.

The common fees you should be aware of

1. Expense Ratio– It is an annual fee that the mutual fund charges to cover the funds expenses, including 12b-1 fees (see below).
2. Load or Front End Load– It is a sales charge that is paid to the individual or company that has provided the investment to you.
3. 12b-1 Fee– It is a marketing fee charged by the mutual fund and usually get passed on to the individual or company that has provided the investment to you.
4. Back End Load or CDSC– This is a fee that is charged when you or your advisor decides to sell the investment within a certain period of time. Generally, it decreases the longer you hold the investment.
5. Advisor Fees– This is a fee that an advisor charges you for their service.

Unfortunately, there are more costs that can be associated with your investments. Some are even less obvious than the above. The good news is with some of the resources above, one can find most if not all of the fees with a little (or sometimes a lot) time.
Or if you would like to avoid wasting your time in determining the actual cost of your investment related relationships, you can contact me and I would be happy to provide a detailed cost analysis of all your investment relationships. This is just one of the many complimentary services we provide at Mountain Pass Planning.