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Investors May Start Asking More About Advice Fees

April 17, 2017

Financial advisors may face more questions from prospective and existing clients thanks to a recent breakdown of various fees by U.S. News & World Report.

The magazine warns investors that even the common fee-based model can come with hidden fees, such as the commissions advisors can charge in a fee-based model rather than a fee-only model. Getting information about fees from quarterly statements can be difficult, meanwhile, Larry Miles, principal at advice firm AdvicePeriod, tells U.S. News.

Benjamin Greenfeld, chief investment officer of Waldron Private Wealth, suggests that investors ask advisors for an itemized list that includes commissions as well as third-party and management fees, U.S. News writes. He warns that some of the hidden costs, such as 12b-1 kickbacks on mutual fund sales and back-end charges, are hard to spot without digging deep into transactions, according to the publication.

Proprietary products and alternative investments, meanwhile, may come with additional expenses that may not even be categorized as fees, U.S. News writes. While they often provide protection against losses, profits are also capped — and the only way for investors to really understand the costs involved is to literally ask a Ph.D. for an assessment, one finance professor claims to the magazine.

To avoid the fee question altogether, the publication suggests that investors who don’t need more complex wealth management such as tax and estate planning carry out their investment management without an advisor at all, through low-cost and exchange-traded funds.

And while the Department of Labor has delayed the implementation of its fiduciary rule, which the publication says would have required retirement brokers to put clients’ interests first, U.S. News recommends that investors ask advisors whether they’re fiduciaries.

By Alex Padalka
  • To read the U.S. News article cited in this story, click here.