Copyright (c) 2010 Brian Fricke
I can’t tell you, honestly, how many times I’ve heard someone affirm, “I’m not pleased with my broker, however I don’t really pay him, so I can’t really be that upset.” And when I tell that person that while they might not see the money coming outside of their account, they’re still paying the broker, the person nearly invariably says,
“Oh no, I don’t. I don’t pay them anything.”
Then I exhibit them their account statement, and we gaze at all the different mutual funds or variable annuities that they hold, and I clarify that these companies are paying the broker or brokerage firm. Brokers usually don’t fully tell the circumstance that they are getting paid by a corporation for selling human beings their mutual funds or annuities. At least not the total amount they’re being paid. So when clients find outside, they’re usually shocked beyond belief!
It’s different with a Fee-Only® companies. They’re investment advisors and wealth managers. They really ‘do’ absolute financial plotting. And they charge their clients a fee – they tell it fair up front so their clients know exactly what it is.
Human beings can’t really constitute an apples-to-apples comparison between Fee-Only® companies and those brokers who deal in mutual funds since they don’t have mutual funds that pay them. They’re paid by their clients, not the investment corporation! So Fee-Only® companies provide advice and constitute decisions that are in their client’s best interest. And they can do that since we’re not being paid by anyone else.
Let me clarify how this might constitute a difference in your financial lifetime. Affirm you have $100,000 invested with your broker and you are in mutual funds. I’ll employ an example of the US mid-small-cap collection of mutual funds. And I’ll compare it to something called an exchange-traded fund, an ETF, that our firm might employ. It’s a fund as well, however it’s a completely different animal than a mutual fund. The major difference really is the cost.
With mutual funds, the average costs that you don’t see (it’s told, however it’s not simple to find) is 1.43%, per year. So if you have $100,000 invested, you’re really paying $1,430 per year. Immediately compare that with an exchange traded fund (ETF). The average cost for this type of fund is .51%, or about ½%. On the same $100,000 account your yearly fees would be $510.
That’s a savings of over 64%! ($510 vs $1,430)…however what does that mean for you?
Over 10 years assuming an average 8% giveback you’d have $19,100 more in your account! What would you do with an extra $19,000?
That’s the difference in the fees and costs that most mutual fund and annuity brokers don’t exhibit you! (Notice: The costs are at least double with a variable annuity!)
Brian Fricke is the Author of “Worry Free Retirement, Do What You Want, When you Want, Where You Want”. For the last 6 years in a row Brian and his company – Financial Management Concepts – have been named one of America’s Top Wealth Managers. For more information, please visit http://www.BrianFricke.comscp.bfreesystem.com Boresha-bskinny-coffee.com Learn More About The Best MLM Compensation Plan Click Here Click Here For More Info