SEC says investors need to know more about fees

Seemingly small or hidden fees can cause a big dent in portfolios over the long term, regulator warns

Feb 20, 2014 @ 12:29 pm

By Mason Braswell

The SEC has issued an investor bulletin, raising concerns over fees and whether or not clients understand how their financial adviser is compensated.

The bulletin, released Wednesday, warns that clients may not be aware of all the fees on their accounts or understand the long-term effects of fees attached to financial advice or investment products. Seemingly small or hidden fees of as much as 1% can reduce a $100,000 investment by nearly $30,000 over 20 years, the Securities and Exchange Commission's notice cautioned.

“Fees may seem small, but over time they can have a major impact on your investment portfolio,” the bulletin said. “Along with the other factors you think about when choosing either a financial professional or a particular investment, be sure you understand and compare the fees you'll be charged.”

While the bulletin is aimed at educating investors, the SEC is hoping that advisers will take note as well, said Mindy Rosenthal, president of the Institute for Private Investors.

“To me what this is saying is, 'We're letting you know that this is important to us and this is something we're really thinking about,'” she said. “It's about disclosure and do people understand what they're paying and how it impacts them.”

While the SEC did not name specific products or investment strategies, it defined a number of different types of fees that clients should be aware of, including investment advisory fees.

The regulator also highlighted the annual fees charged by mutual funds and exchange-traded funds, 401(k) fees, annual variable annuities fees and other charges related to minimum account balances, account transfer, account inactivity and wire transfer fees or other charges.

The bulletin encouraged investors to ask questions such as how their adviser is compensated, whether all fees have been disclosed, and how some fees can be reduced or eliminated.

In addition, the regulator cautioned on commissions and transaction fees, including markups on proprietary products, sales loads on mutual funds and surrender charges, particularly on an early withdrawal from a variable annuity.

Investors should also be looking at account opening documents, account statements and any product documents to understand the types and amounts of fees being paid.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print