When you shop for something, do you know approximately how much it should cost? Of course you do. You would know that you shouldn’t be paying $10 for a gallon of gas or $20 for a dozen eggs, and most people actively look for the best deals whether it’s coupons or sales. That’s why it’s shocking that most people don’t know what they’re paying inside of their investments. I meet with people every week that think they’re paying little to no fees and are paying 2%-4%+ in various fees on their portfolio.

Now part of this does fall back on the consumer, but the real problem are the laws and regulations that make it so many of the fees don’t even need to be disclosed to the client. A 1%-3% increase in fees may not sound like a lot, but those fees compound as your accounts grow. The following graphic is taken from America’s Best 401(k). They illustrate 3 hypothetical people who all invest $100,000 at age 35 and defer it until age 65 — The only variable is the fees being charged. As you can see from the graphic below, David who is being charged 3% in fees has almost half the growth as Joe being charged 1% in fees.

On the surface it may sound like I’m encouraging everyone to go with extremely low fees in their investments, but that’s not necessarily a good thing either. Some people should be paying higher fees because having management, guarantees, or access to their accounts are a higher priority than growth.

My recommendation is to simply know what you’re paying, and make sure that you’re OK with what you’re getting from those increased fees.

If you’d like to know exactly what you’re paying inside of your investments, contact our office at (888) 960-4494 or info@andersfg.com to get your complimentary Investment Fees and Risk Analysis sent to you.