If you’re paying someone to manage your investments, there’s a very good chance you’re paying too much for the service. And there’s an even better chance that you don’t know how much it’s costing you.

The long and short of it is that the financial business is expert at creating impossible-to-understand agreements – designed to cloak how you’re being charged and how much they’re charging you.

[ad#Google Adsense 336×280-IA]All managed accounts charge a fee, usually between 1% and 1.75%, to cover trading costs, underlying fund fees and advisory fees. It’s not cheap, but at least you get something for the money you’re paying… Most people need that help.

The more complex the account, the more you pay to have it managed. Stock and option accounts cost more to manage and require more activity than bonds, so it naturally costs more to manage them.

But today, many big banks are now adding a “wrap fee” of as much as 1%, in addition to management fees.

(Wrap fees are broadly defined as an additional charge for the advisor’s overall management of your assets.) And in most cases, it isn’t okay.

The worst part is that many people don’t know they’re being charged a wrap free, and most are getting nothing for it.

The best way to avoid wrap fees is to set up a meeting with your advisor and have him detail each fee you’re being charged. You should also have him or her explain what you’re getting for those fees. That’s the important part.

The industry has mastered the art of contract confusion, and it bets on the 80/20 rule: 80% of clients will never question their charges. So be a part of the 20%, and start asking questions.

If you’re not satisfied with the answers, or if your advisor refuses to reduce or back off on the fees, then it may be time for a change.

The costs of paying for advice, trading, management activities and statements are expected. But allowing your advisor to charge another layer of fees to your account just because they can is not.

Your advisor is your employee, not a friend, confidant or golf buddy. Make sure you know how much you’re paying all your employees and what you’re getting for it.

Good investing,

Steve

[ad#IPM-article]

Source: Wealthy Retirement