Do you REALLY know how much you are paying in fees to
your investment advisor? There are so many different ways your advisor may be
collecting cash related to your account. Ask him/her:
How much money did you collect in fees from my account
last year either directly from me or indirectly from others as payments related
to my account holdings or activities? Say you want to know in actual
dollars, not in percentages, as the real dollar amount may shock you. Ask how
much your advisor received in commissions or loads for investments sold to you
in the past and then wonder if those investments were best for you or best for
the advisor. The amounts may be staggering and may be completely out of line
with the service received or the portfolio returns achieved. The magnitude of
fees paid are often obscured within confusing descriptions or hidden in the
fine print. If your advisor doesn't give you a direct answer it should be
obvious what that means and it's not good. Did your portfolio outperform a
simple index-fund portfolio? Good chance it didn't. So why are you willing to
pay $5,000 or $10,000 (or more!) every year? Demand transparency! And perhaps
it's time to consider if an hourly, fee-based advisor can give you advice that
is unbiased by complicated compensation schemes and without all the hidden
costs.
Larry Pike, CFA
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