Real World Investment Fees

Here is what advisors see.

C.P. is 74 years old.  Her assets are at a popular brokerage, E.J., where she has an advisory relationship.

C.P. is not high net worth.  She has $112,666, of which $47,497 is with E.J. She has $62,600 in savings at a bank that is earning a pittance that she wants to get invested.  This is her nest egg!

Cursory reading has convinced her that having the $62,600 with E.J. in high-cost funds is not in her best interest.

Here is a list of her current investments with E.J.:

Fund/Ticker Symbol	Load	Mer	Invested Amount $s	12 Mo. Performance (%)	Rank
ABALX	Front/5.75	.59	6,798	8.70	19
ANCFX	Front/5.75	.61	9,507	10.46	60
AFRCX	Back/1.00	1.53	2,388	1.49	54
ACTFX	Back/1.00	1.62	3,290	11.71	19
HYMCX	Back/1.00	1.53	1,438	9.37	66
LWSCX	Back/1.00	1.96	7,634	6.55	39
ISFCX	Back/1.00	1.91	5,536	2.38	78
CAIBX	Front/5.75	.62	4,275	5.96	11
AEPGX	Front/5.75	.84	2,057	1.70	40
AGTHX	Front/5.75	.66	2,316	9.40	61
AIVSX	Front/5.75	.59	2,253	10.52	60

 
Note that the Mers, annual expense ratios, range from .59% to 1.96%/year.  Note, as well, that the largest investment is in a front load Fund that takes 5.75% right at the get-go.  Hmm!

The ranks shown are from Morningstar.  They average out to 46, which means the performance numbers are roughly average; and because Funds tend, on average, to underperform their respective  market sectors after all expenses over the long term, it is likely that C.P. would have a difficult time getting good performance with this setup.  This is especially the case when you understand the impact of the loads which put the client significantly behind the starting line.

Her asset allocation, obtained by putting the above ticker symbols and dollar amounts into the Morningstar X-Ray utility, shows:

4% cash
46% U.S. Stocks
15% Foreign Stocks
31% Bonds
3% Other

I'm not sure, on top of everything, whether C.P. pays an advisory fee.  If she does, it obviously just digs the hole deeper.  She, then, would be paying a fee to be put into high-priced funds - a recipe for building an advisor's account but not the customer's account.

To add insult to injury, there is a charge of $95 to terminate each account.  The above listing is for two accounts:  a regular account and a small IRA.  Ooch!!  Think about this.  If they do a bad job and you want to fire them, they charge you for sending info to another custodian.