Ep. 5 – 21 Questions (Series) – 4. Will you itemize all your fees and expenses in writing?

Welcome to the Real Retirement Financial Planning Podcast. 

This series covers the 21 Questions to Ask Your Financial Advisor. 

The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

Responses to Jason’s questions I read from other advisor websites lacked depth.

Yes, or No, sometimes needs more context and a greater explanation into the whys.

The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.


21 Questions to Ask Your Financial Advisor

4. Will you itemize all your fees and expenses in writing?

Jason wants a “Yes” here.

Yes, at MARGIN we list specific management fees in each quarterly performance report; we also provide calculation details on any periods that would include a proration for relationships starting mid-quarter; we spell it out clearly.

You pay us one flat-fee billed quarterly.

Disclosure and transparency are different!

Do you understand the hundreds of privacy disclosures you just agreed to, due to the new General Data Protection Regulation (“GDPR”)?

I don’t!

What about the 50-page disclosure documents for some of the investment products you invest in?

You understand all of it, Right…Right!?

Probably not? But! It’s disclosed!

How I’ve seen it go down:

“I told you on page 501, roman numeral II, section 3a, footnote 5. What? You don’t remember?

You read the whole thing, right? I disclosed it to you…oooooooh…What I said is not what is written on that section, sorry…”

What’s even worse is an advisor’s description of their fees on their website, if they list it at all, is when it’s “framed” differently than on their disclosures.

Framing bias at it’s finest.

Exhibit a:

Exhibit b (the firm’s ADV disclosure):

Why not say you charge 1.6% to 0.40% on your website exactly like the disclosure?

Why not just be up-front with clients, and list what your disclosures say on your website?

Probably because that’s something you don’t want to share up-front.

This isn’t the only firm that does this.

Or, the range is crazy on what someone charges.

Would you work with a car dealer selling a car that’s price ranged from $30k to $100k?

Then, why would you work with an advisory firm who lists an asset based fee of 0.75% to 2.25%?

That annual fee on $1,000,000 would range from $7,500 to $22,500…

Do you really understand how your fees are being calculated?

Are the fees clearly stated in writing, how they are calculated, and if they will change?