How Much Are You Really Paying? Hidden Fees In Your Accounts
In this video, I go over the many ways that you pay fees in your investment accounts. It's not always clear how much you pay and the big Wall Street firms have made a science out of hiding fees over the years. I recently helped a couple of people with a second opinion on their accounts and had a difficult time deciphering how much they were actually paying! That inspired this week's video.
At Transformative Financial, I am completely transparent about how much my clients pay in fees (in dollars). While Transformative Financial isn't the cheapest option, we are fairly priced for the value we bring to clients.
Patrick King: A lot of financial advisers play a game of hide and seek with their fees, and it’s not a fun game for you. Find out how they do it, coming up.
Hey, folks. I'm Patrick King with Transformative Financial. Here, on this channel, we help people make money, keep money, and feel more financially secure about their future. That's something that you're interested in, please give me a call, contact me. My email is firstname.lastname@example.org, my contact information is in the show notes below. I'd love to talk with you and see if it's a good fit. Today, what I want to talk about is, lots of financial advisers play a game of hide and seek with their fees.
It's not a very fun game for those adviser's clients along the way. The Genesis of the idea for this video today came from a couple of folks that I was talking to this week, who are working with another adviser, wanted a second opinion. I reviewed their statements. I do this for a living and I had a hard time figuring out exactly how much they were being charged on a monthly, quarterly, or annual basis. The fees are sometimes buried in disclaimer language, I had to go onto the internet and try to figure out through the fine print how much they were being charged, and only had a best case scenario was a range of fees, and sometimes it just wasn't even available at all.
There's certainly nothing wrong with a financial adviser being paid for delivering value to a client. I certainly believe that I bring so much more value than my fee to all my clients. But at least I'm transparent about it, like I show my clients how much in dollars my fee is per year. Because part of those fees are tax deductible in certain cases. It's important to know that and know exactly how much you're paying.
Of course, two, I tell my clients, if you look at my quarterly fee and you don't think that I've delivered that amount of value, then certainly I haven't lived up to the promise of what I want to do, or at least double that value, lived up to the value that I want to bring to you and you're certainly free to walk away at any time. No obligation, of course, to working with me. But I just think it that it's funny. Easter just came and went and if you hid Easter eggs before-- I just remember when I was a kid, we dip the PAAS Easter egg, coloring, and actually had real eggs and hid them in the yard. Unfortunately, I do remember several months later being out with mom and dad, where they're doing some yard work, and found an egg hidden in one of the bushes in the front yard that had been out there for several weeks.
I just remember taking that thing and cracking it open and it was just nasty and rotten. A hidden fees are lot like a rotten Easter egg that was never found. They stink, nobody wants them, and it's just a bad surprise to have. But, anyway, just to give a quick rundown of the ways that certain financial advisers can charge you fees. It can be an investment advisory fee, you could have separate account manager fees, you can have fees associated with buying and selling. On both sides of the transaction, whether you buy or sell, you could get charged a fee. You could get charged mortality expenses, if you're in an annuity for instance.
Oh my gosh, there's just 12b-1 fees that are part of the internal expenses of a mutual fund that go directly to the adviser. I think Wall Streets really made a science of, first of all, hiding these things and, second of all, making it so damn confusing, that the in consumers just give up and just say, "Oh, I guess he's a good adviser. He's going to look out for my best interest," may not be the case. What's fair? What's a fair fee? If you are a $1 million and over, maybe around the 1% range, maybe less depending if you have more assets than that.
Under a $1 million, I would say the 1.25 to 1.5% per year range. There will be internal expenses associated with the investments. For me, I've minimized those as much as possible. Those don't go to me, those go to the people who run the strategies that I put into the portfolio. I've reduced those as much as possible because that's what I put my money into too. I want to save my money for me as well. What's good for me, is good for my clients. Yes, if you don't know what you're paying you adviser, probably a good idea to ask. Ask how they're getting paid, how much it is, and all the different ways that fees are being taken out of the accounts. For not just them, but for maybe a strategy manager, or a mutual fund, or an ETF, or whatever it is.
Last of all, the thing that kind of makes me cringe the most is when I talk to people, and they say, "Oh, yeah, I've got a guy, but he doesn't charge me anything." No, no, no, no, no. Chances are they're paying the most and they're hidden. Those fees are hidden, so that just makes me cringe every time. Fortunately, more and more people are kind of waking up to how this game is played. Yes, that's why independent advisers like me are tending to grow more and more as a percentage of the financial advisers in this industry, because of all the transparency around the fees and just play and work cheaper too. Usually, what I find is, compared to a brokerage firm, I'm probably 1% per year cheaper on average, is what I've seen a lot of times.
For a client that's over a million bucks, that's a savings of $10,000 a year, $10,000 a year. $10,000 a year compounded over 30 years is over a million bucks. Why wouldn't you want that? Especially, if you're getting things like financial planning, help with your estate planning, someone to review your property insurance, your life insurance, your disability insurance, long-term care, all that stuff, and help you put all together a strategy, and be able to actually talk to you about taxes [laughs]. A lot of those brokers don't do that, and they charge you more. Anyway, that's my rant for today. It's a little off script today, but I had this come up, and I thought this would be a great topic.
If you've got questions, please hit me up. Contact information is below, email@example.com is my e-mail. Thank you so much for watching. If you like this, click like. Of course, subscribe. If you've ever watched a YouTube video before, subscribe. That always helps me and my videos, so I appreciate that. Until next time, cheers and talk soon.
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