It’s important to remember that you MUST pay for investment advice and investment management. What you pay should be reasonable for the investment vehicle and the expected returns of the asset. You should be fully informed of commissions paid to brokers or salespersons. Below are 3 common fees within mutual funds:
Management Fees: Include management and administrative fees listed in the fund’s prospectus. These fees represent the costs shareholders pay for management and administrative services over the fund’s prior fiscal year.
12b-1 Expenses: A fee used to pay for a mutual fund’s distribution costs. Often used as a commission to brokers for selling the fund. The amount of the fee reduces the investor’s return.
Gross Expense Ratio: The annual fee that funds charge their shareholders. It expresses the percentage of assets deducted each fiscal year for fund expenses including 12b-1 fees, management fees, administrative fees, operating costs, and all other asset based costs incurred by the fund. Fees not included within this ratio are portfolio transaction fees, brokerage costs, and front or deferred end loads.
If you believe you are being feed excessively, a third party advisor may be able to review the fees you’re currently paying and determine the best course of action.