What Are You Really Paying Your Money Manager?

When you click on the button below you will get an excel file with some calculations, let me give you some context as to what it is. I have chosen 4 different mutual fund managers at random. I have pulled their expense ratios and turnover percentages. I also included a management fee a advisor might charge you. You will be able to see how it is possible to be paying a lot more than the 1% management fee. Be careful who you hire, before I even look at performance from a manager I would want to screen out these high expense ratios and high turnover (trading) cost mutual funds. I want a manager that relies more on a buy and hold strategy over someone that is actively trading. A advisor should be using institutional class shares to begin with. These share classes usually have low fees and don’t have front or backend sales charges. You could end up paying a lot of money in redemption fees depending on the class of mutual fund your advisor is using.

In the example excel file you might think you are paying 1% but between the trading costs and expense ratios from the mutual fund you are paying 2.26% more. Moral of the story is know what you own and be aware there are more costs than the stated management fee if a advisor is using ETFs or Mutual funds.