Home > Uncategorized > An Investor’s Guide to Fees and Expenses – Bloomberg

An Investor’s Guide to Fees and Expenses – Bloomberg

About 140 years ago, a retailer named John Wanamaker figured his customers and salesmen had better things to do than spend hours haggling. His invention: Assigning one price, “plainly marked,” to every product.

The price tag caught on nearly everywhere with one major exception: financial services. Investors still have a surprisingly difficult time figuring out what they’ll pay for financial advice, for mutual funds and especially for their retirement plans.

New regulations required administrators of 401(k)s, such as Schwab or Aon Hewitt, to disclose detailed plan costs to their client companies in June. By the end of August, companies must pass that cost information on to plan participants.

Will those employees understand the notices arriving in the mail? “The majority will probably recycle it,” says Bill McClain, a principal for Mercer Consultants. The fine print and legalese will deter many investors, while they also might not understand how important costs really are. A fee that eats up 1 percent of assets each year might not seem like much — except that the charge bleeds assets from your account year after year. Say you invest $10,000 and earn 5 percent per year. That 1 percent fee will cost $1,487 after 10 years and $4,622 after 20 years.

To help readers figure out if they’re paying too much, this guide details the typical costs of various investment products and services. If you’re paying too much, don’t sweat it — go out and negotiate a new rate. Think of it as an instant investment return.

via An Investor’s Guide to Fees and Expenses – Bloomberg.

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