Why ask your financial professional about fees?

As a financial professional, I know there are many different ways that investment advisors are compensated.

Of course I believe that financial professionals need to be compensated for their time, effort and expertise, but with the various fee structures out there, the question I always encourage my clients to ask is: Are the costs fair, reasonable, transparent and helping to improve your long-term investment results?

I encourage people to get gutsy, and ask themselves and their financial professional a question they probably haven’t asked before: How much am I paying in fees?

In the world of financial services, there are different kinds of fees – trade commissions, mutual fund loads and fees, and advisory or management fees, to name a few. While cost is only one factor when it comes to dissecting the value of an investment or your relationship with a financial professional, it’s important for investors to understand what they’re paying and why, and how these costs impact their returns.

According to a 2013 Schwab study, 83 percent of investors do research before making a major purchase. Yet, just half of investors say they know how much they pay for their investments, and only 16 percent who work with an investment professional have asked how fees and commissions impact their portfolio’s returns. The fact is, a seemingly small difference in fees can make a potentially big difference in your return, especially over time. I personally believe we are in a lower investment return environment, especially considering the historically low interest rate environment. Therefore, reducing costs becomes more important than ever.

It’s important to understand, however, that not all investing fees are bad. It’s really a matter of understanding the value you are getting from what you pay. You might be willing to pay a slightly higher fee for different kinds of services that add value, such as more personalized financial planning or a higher-touch relationship. Maybe you’re a small business owner with a specialized set of financial needs that requires more help and attention from a financial professional.

A couple ways to be more aware of the fees you’re paying is to regularly review your statement and ask your financial advisor directly about what fees you’re paying, why you’re paying them and how they are impacting your financial goals.

Starting with these questions will help you become more knowledgeable and confident about your finances and the value you’re receiving, but don’t stop there! Keep asking questions and stay engaged, because your portfolio may be your most valuable asset when it comes to achieving long-term financial success.

If you’re curious to learn more, please give me a call today. Here at Charles Schwab we offer complimentary, no-obligation financial consultations and portfolio reviews. Our goal is to make investing more affordable and accessible to everyday investors.