Fight against investor fee confusion far from over, says Dalbar

Fight against investor fee confusion far from over, says Dalbar
While 74 percent said fees are critical for investment decisions, nearly half are unsure or unaware what they’re paying.
AUG 14, 2024

Despite the industry's best efforts, there’s still a lot of work to do to dispel fee confusion among investors, according to a new study by financial services research firm Dalbar.

The firm’s 2024 Investor Insights: Fees & Charges report highlights a significant knowledge gap, with many investors finding it challenging to grasp the costs associated with their investments.

According to the study, while 52 percent of investors expressed confidence in their understanding of investment fees, a substantial portion remains either uncertain or entirely unaware of the fees they are incurring.

"The findings highlight a critical need for improved communication and education around investment fees," Jared Licklider, senior research manager at Dalbar said in a statement Wednesday.

The data from the report suggest a correlation between income levels and fee comprehension. While higher-income investors showed greater confidence in their understanding, 2 percent of those earning under $100,000 annually reported being completely unaware of any fees associated with their investments.

And while a healthy three-quarters (74 percent) majority of investors considered fees to be extremely or very important when making investment decisions, only two-thirds (66 percent) said they have switched to a different investment due to lower fees.

On the bright side, most Americans appear aware of the erosive effects of fees on their wealth-building efforts, with 68 percent of participants acknowledging that fees could have a significant impact on their long-term investment performance.

"Financial firms must prioritize clear and concise fee disclosures, and investors should proactively seek to understand the costs associated with their investments," Licklider emphasized.

When asked where they get their fee information, investors in the survey said the internet and their account statements were their primary sources of truth. It’s not a perfect fix, however, as many found the experience of searching difficult, and the information itself hard to understand.

“The industry has made strides in fee transparency, but there's still work to be done," Licklider stressed. "Simplifying fee disclosures and providing investors with the tools to make informed decisions should be a top priority for investment firms and financial professionals."

Latest News

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity
Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity

Some investors recently have seen million dollar plus decisions by FINRA arbitration panels involving complex products decisions go their way.

What does it take to feel 'financially comfortable' or 'wealthy' in 2025?
What does it take to feel 'financially comfortable' or 'wealthy' in 2025?

New report shines a light on how Americans view wealth today.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.