Management fees … 12B-1 fees … administrative fees … expense ratios … turnover cost … trading fees … internal fees … where does it end? Chances are, if money is invested anywhere on Wall Street, you are paying a series of costs or fees. In the “risk” world of investing, it is impossible to escape fees. Some alternative investments are a bit more transparent, but one still has to be careful to truly quantify all the fees ... and not leave out the undisclosed or unknown ones. By quantify, I mean ... add up the total number, place a dollar sign by it, and say ... that is how much I am paying for fees! Most investors find they have to dig deep within the prospectus or account statements to find out what they are actually paying to hold those investments. Unfortunately, some fees are called “unknown” and “undisclosed” because, they are – you guessed it – unknown and undisclosed. Often, the companies are not hiding them. They might not know them until the end of the year. The bottom line is ... some traditional advisors and brokers do not have to fully disclose ALL of the fees contained in a portfolio. Most Registered Investment Advisory fiduciary firms offer transparency at the highest level and are compelled to expose ALL fees contained in a portfolio.
Do you receive Financial Advice to the Fiduciary Standard of Care or the Suitability standard? It’s important to know! Those 2 words, fiduciary and suitability, are critical in understanding the motivation behind the person offering financial products or advice.
Recognizing the difference between the fiduciary and suitability standards may also help you to appreciate the level of care you receive from a trusted financial advisor. Although the distinction between the fiduciary and suitability methods of offering advice is rarely discussed by “broker-led” large financial companies, we feel it is essential for investors to know the difference.
Broker - the suitability standard: Offers products for sale from a range of products carried by the company he or she represents and is paid commissions calculated as a percentage of the amount of money invested into the product
Advisor - the fiduciary standard: Offers “best advice” taking into account the needs of each individual client and is paid a quarterly fee calculated as a percentage of the assets under advisement
The fiduciary standard requires advice to be provided in the best interests of the client including the disclosure of possible conflicts of interest.
WHY SHOULD YOU CARE? The differences were a contributor to the 2008 credit crisis, especially within the selling of complex financial products based on housing debt. More recently, the initial public offering (IPO) of Facebook stock was roiled by alleged conflicts of interest by those offering the stock.
Since 2008, the U.S. Government has also begun to care about how financial recommendations are delivered to members of the general investing public. The lack of “self-policing,” protection of client interests and frequent scandals have led our legislative system to pass The Dodd-Frank Wall Street Reform and Consumer Protection Act. One goal of this legislation was the creation of a single standard for financial advice based upon the current fiduciary standard. Informed investors should ask: “Why does the government feel I need protecting and from what?” Today’s financial industry offers its clients a wide range of options. In our eyes, every client deserves to have their needs put first and solutions offered according to those needs.
At Fletcher Financial Group, we understand fees must be a part of investing in "risk" money. By utilizing alternative investing paths and lower cost alternatives, fees can be lowered substantially. There are also alternative investment options with no annual fees. When investing with "risk," one must determine if they are receiving equivalent value for the fees being assessed. The first step is to determine the ACTUAL amount of the fees … the obvious ones and undisclosed ones that are not so easily revealed? That's where the 3rd Step of our 3-Step Review becomes valuable.
Our Investment Fee Discovery is the 3rd step in the proprietary 3-STEP REVIEW process. Our client’s portfolios are carefully scrutinized to uncover the hidden costs and fees. If an investor is working with a fiduciary advisor, the fee structure is already transparent, but traditional brokers are often not aware of the “behind the scenes” fees and costs. Our process allows us to fairly price the relationship an investor has with their current advisor, thus giving them the ability to answer a very important question: Is the advice I am receiving worth what I am paying? Call today and ask to go through our 3-Step Review