How Investment Fees Can Impact Your Portfolio

Although investment fees and expenses might seem slight, over time, they can have a major impact on your investment portfolio.

All products and services carry certain fees and expenses – the realm of investing is no exception. To help investors visualize just how much of an impact these fees can have, the Securities and Exchange Commission (SEC) generated a graph showing what a portfolio with a 4% annual return looks like with recurring fees of .25%, .50% or 1% over a 20 year span.

Investors should consider many factors before settling on an investment or choosing a financial advisor. Fees should always be considered, but be wary of choosing an investment or advisor solely based on how much you can save on fees.

If you are unsure about the fees and expenses associated with any particular investment or advisor, you can usually get the information you need by thoroughly reading your opening documents, account statements, confirmation notices, and other documents your financial professional has provided you. Once you find out how much you are being charged, it is important to understand the impact those fees will have on your investments.

For this, you will need to ask your financial advisor some pointed questions, such as:

  • Can you explain what each fee is for?
  • Can you provide me with a fee schedule that details all fees I will be paying in relation to this account?
  • Will there be additional fees in the future for holding or selling my investment? If so, will I be informed of those?
  • Is there any way to reduce the fees I'll be paying?

Ask you financial advisor any and all questions you have regarding investment fees and expenses. It's your money, so make sure you know how much you will be paying and what those fees are for. Your financial advisor should also be candid with you about any compensation they receive from your investment. Don't be afraid to ask your advisor how much they get paid and how they get paid.

Transaction vs. Ongoing Fees

Investment fees typically come in two forms – transaction fees and ongoing fees. While transaction fees are charged per transaction, ongoing fees are charged regardless of your investment activity. An account maintenance fee is a good example of an ongoing fee, while transaction fees are charges like commissions and markups. Both transaction and ongoing fees can affect your investment portfolio.

The SEC's Office of Investor Education and Advocacy wrote a very thorough article that breaks down common investment fees and questions investors can ask their financial advisors. Unfortunately, financial professionals can participate in misconduct like charging fees that are too high or recommending investment moves solely for commissions. If you believe you lost money through investment fraud or misconduct, Meyer Wilson is here to help. Fill out a free case review form to learn more about your options.

For more information, watch Attorney Courtney Werning's video below on how brokers get paid:


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