Most fee-only financial advisors are strong believers in full disclosure. Most feel every investor should know exactly what they are paying, and should receive value and service that is equivalent to that fee.
The sad reality is, most investors have no idea what fees they are paying, and to who. Take your 401(k), for example. Some may realize that they have to pay the managers of the mutual funds they invest in. Others, because they never write the manager a check and the money comes directly out of their investment account, do not. Right now, the average US stock mutual fund charges 1.31% annually.
However, the fees don’t stop there. The firm that services the 401(k) plan also draws a cut. In many common scenarios, this fee is an additional 1%. Some plans may even require participants to pay the fee for the third party administrator. By the time all fees have been paid, it is not unusual for total expenses to be around 3%.
So are you getting 3% of value from the people who are responsible for giving you a top-of-the-line 401(k) plan? Most investors would say “no.” If not, speak to your HR department and express your displeasure. If enough employees are unhappy, the firm will be forced to find a plan with lower fees, or a service provide who will add more to your bottom line.
FYI – Since this post is about disclosure, allow me to mention that Net Worth Advisory Group’s clients usually pay no more than an all-inclusive fee of 1.5% of their invested assets. This fee covers the cost of their investments, the advice they receive, and all transaction fees.