I thought my question was simple: How much was I paying my investment adviser in fees?
After a series of phone calls that elicited the kind of confusion and frustration I have rarely experienced outside of interactions with cable-company customer-service representatives, I think I have an idea. Barely.
Describing the fee disclosures of my adviser as opaque would be generous. The experience left me wondering whether someone even less savvy than me, a Wall Street Journal reporter, would be able to navigate this system, to ferret out the good information from the bad.
In most offices, I suspect that people try to stay up on sports or television to prime for water-cooler gossip. But at the Journal, I was growing increasingly ashamed of how little I knew about the workings of my own investments. So, I decided to research what fees I paid to invest with my financial-advisory company—one of the largest in the U.S.
All of my investments are in mutual funds or exchange-traded funds. Though I don’t have a finance beat—I am an investigative reporter who specializes in data analysis and computer programming—I am still guided by the Journal’s conflict-of-interest policy that aims to prevent conflicts between employees’ investments and the subjects we may cover. So I don’t do any individual-stock investing.
I assumed the fee information I was looking for would be readily available in the documents section of the company’s website. Wrong. I did see a toll-free number for customer support, so I gave them a ring.
I told the man who answered that I wanted to find out what fees I pay. In retrospect, this was a little like asking your spouse how much divorce lawyers cost. As he began to fret, I assured him that, no, I wasn’t unhappy, just curious.
There is a $125 annual flat fee, he told me.
Alarm bells went off. That’s it? I asked. That can’t be it. I assumed there was a percentage charge on my investments.
He laughed. We’d love to charge that, he said. But no, $125.
Was that the only fee, I asked? I was increasingly dubious.
Well, he said, each fund in which you’re invested has internal fees.
How did I find those?
And so began our journey into the bowels of the investment firm’s website. He suggested I click on various pages, only to discover that no, the fees weren’t listed there. By the time he suggested that I go to Yahoo Finance and look up various funds to find out about their fees there, I knew I’d had enough.
Twenty minutes into the call, I said I had to go.
I hope this has been helpful, he told me. I assured him: It wasn’t.
I went back to my desk to seethe. There is a local financial adviser at the firm whom I meet with periodically for account reviews, and I decided to shoot him an email asking how I could find out all the fees I pay, and where these were documented. I also wrote an email to a colleague with the subject line, “MAY PULL HAIR OUT.”
An answer of sorts
But apparently my irritation set the company on alert that we had entered the breakup danger zone. The man I had spoken with left me two voice mails promising that he had the information. I conceded to returning their calls after I received a third from his supervisor suggesting that, really, he could help me.
The man I spoke with this time proceeded to tell me the opposite of what the previous adviser had told me. No, there was no annual $125 fee. That was only for people investing in individual stocks. My portfolio had an annual fee of 0.85% of assets, deducted quarterly.
So what about these internal fees? He said those ranged from 0.4% to 0.8% of assets annually.
Well, then, what was my actual number? He said that I was invested in the “moderate” risk basket, so the expense averaged to 0.55%. Fees would have been higher with more-aggressive investments, lower with conservative ones.
I thanked him and asked where I could see all this online.
He said that he wasn’t sure, but that the information would be in whatever packet I received when I enrolled in the program.
I told him this document was either long gone or in the drawer where old IKEA instructions go to die.
He said I could always try looking up the individual fees on Morningstar’s website.
I thought that this was about as much as I could stomach of the fee-finding quest. I finally had an answer to what fees I paid, even if I remained in the dark about where they were documented. But about that time, I received a response from the adviser who normally schedules my portfolio reviews.
He also cited me the 0.85% number. And he said the internal expense fees were “around 0.5%.”
I wrote him back and told him that I had finally spoken with someone who gave me the right answer, and that the number was 0.55%.
He called me, alarmed. It’s actually 0.5%, he told me.
Well, the other guy told me 0.55%, I said.
No, he told me, you’re in an account with “moderately conservative” risk, and the figure is 0.5%.
The other guy told me I was in the “moderate” account, I said.
Pause. Oh yes, as it turns out, you are in the moderate account, he said.
The 0.55% was correct. My combined fee was 1.4%.
And as for those documents?
“I am trying to find a client approved document that provides you with the internal expenses on the portfolio you are invested in,” my adviser wrote.
I am still waiting.
The Wall Street Journal
7th May 207