E-Mail this Article

SEC says investors need to know more about fees

Feb 20, 2014 @ 12:29 pm

By Mason Braswell

fees, investors, alert, sec, securities and exchange commission
+ Zoom

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.

Get Daily News & Intel

Breaking news and in-depth coverage of essential topics delivered straight to your inbox.



The information entered on this page will not be used to send unsolicited e-mail, and will not be sold to a 3rd party.

REMINDER: This service is for personal use only. For commercial reprints, Web links and e-mailings please contact our Reprint Sales Manager at (732) 723-0569.

X

Subscribe and SAVE over 72%

View our best offer
Subscribe to Print