True story: a client was charged this amount by her former adviser in one year. Once I exposed what she was being charged and explained how a fee-only firm operates, it did not take long for her to become my client. The former adviser provided no financial planning, tax planning, estate planning, or other advisory services beyond managing the retirement portfolio.
On the surface, the adviser’s fee appeared somewhat reasonable, but the devil was in the details. Like most people I speak with, the client had no idea about the additional charges, including 12b-1 fees and front-loaded sales charges, which made up most of the $22,000.
- The amount charged was far out of line—multiples of what she should have been charged and what my firm charges.
- The client was not aware of the total amount. It may have been legally disclosed in fine print, but it was not explicitly explained. Investors should get a complete written analysis of every fee and understand how the adviser is compensated.
- Placing clients in investments that pay the adviser creates a major conflict of interest that large firms rarely discuss.
- The former adviser was not required to place the client’s interests ahead of his or her own—another major problem with many banks and brokerage firms.
As the year closes and a new one begins, it is a good time to review investments and the financial plan and ensure that unnecessary fees are not being paid.
I would like to know what you think.