True Story: My client was charged this by her former advisor last year and needless to say, once I exposed what she was being charged and how a Fee-Only firm operates, it didn’t take long for her to become my client. To add insult to injury, this former “advisor” provided no financial planning, tax or estate planning, or other advisory services to my client outside of just managing her retirement portfolio. While on the surface, this former advisors fees seemed somewhat reasonable, however as we all know, the devil was in the details. Like most people I talk with, my client had no idea of all the other fees that she was being charged, in her particular case it included 12b-1 fees and front-loaded sales charges which actually made up the bulk of the $22,000 she paid. I have such strong feelings about this being wrong on so many levels...I’ll name just a few of them. 1. The amount charged is way out of line, in fact it’s multiples of what she should have been charged and what my firm charges. 2. The client wasn’t aware of this amount. Sure it was “legally” disclosed in the fine print, but wasn’t explicitly explained to her - a big difference. If you are using an advisor make sure you get a complete analysis of all the fees being charged, and how your advisor is compensated - of course get this all in writing. 3. The conflict-of-interest in placing clients in investments that pay the advisor is a huge concern, which all the big firms never like to discuss. 4. Obviously my clients former advisor isn’t required to place their clients’ interests ahead of their own – another major problem when working with the vast majority of banks and brokerage firms. As this year closes out and we begin a new year, it's a great time to review your own investments, financial plan and ensure you aren't paying unnecessary fees.
I would like to know what you think.
Paul R. Rossi, CFA