How to Tell If You're Wasting Money on Hidden Financial Fees

Kyle Ryan

Kyle Ryan, executive vice president at Personal Capital, shares advice on spotting hidden fees that many people don’t notice when working with their financial advisor. He also provides three tips to determine whether their financial advisor is acting in their best interest.

You work with a financial advisor because you believe his services can optimize your investments. But have you read the fine print of the associated products and financial fees? They might be hurting your portfolio.

An annual fee paid to your financial advisor of 2-3 percent might seem like a small price to pay for the security of knowing that your money is in capable hands. However, compounded over the course of a lifetime, those percentages can build up to hundreds of thousands of dollars, according to a report Personal Capital published last year.

Those fees and expense ratios vary greatly across firms and even within the same organization, and they often appear as indecipherable industry jargon buried in the fine print. Moreover, if you are diligent enough to hunt them down, tracing them through your account is yet another beast altogether.

Deciphering the Most Common Hidden Fees

With investments like mutual funds and exchange-traded funds (ETFs), you’ll typically pay yearly service and management fees—and over the course of several decades, those fees can amount to thousands of dollars. There are management fees, advisory fees, service fees, and even 12b-1 distribution fees (which are basically just marketing costs) that are often buried so deep in a fund’s reports that it’s extremely difficult for the average investor to decipher exactly what she’s paying.

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