How do you invest? What do you really pay? At the end of the day, what are your real results? These are questions smart investors should be asking themselves (but usually don't). In this era of more fees, misc. charges, holding periods and back end redemptions, even at discount brokers, how are you really making out?
Working with a new client brought this all to my attention. I know what I found may not apply to everyone; however it will apply to many and very likely apply to you.
I need to preface this by saying that, unlike the majority of registered investment advisors, I have built my practice over the past 15 years by dealing with "small" investors. Many of them are first timers because my minimum account size is only $5,000.
I targeted this group because I enjoy the educational part of my business. A happy side benefit has been that by providing million dollar service to these so called "small" investors, they naturally refer me to parents, relatives, friends and business associates, often with considerably more assets than the original client. What a happy consequence.
Having set the stage, here's what happened with my new client who we will call John. John was 26, newly married with a one year old son. His wife was taking care of the child and John had a good full time job. After selling his house in California and moving to Florida he had $6,000 left for starting a long-term investment program.
Though he had been reading my newsletter for about a year, John decided to manage his 401k on his own. It was a noble effort but provided less than desirable results.
He then attempted to set up a brokerage account at a major discount broker. With his $6,000 he was told that the quarterly fee would be $45, and, of course, if he sold any mutual fund within the first 180 days, there would be an early redemption fee.
$45 per quarter would be equal to an annual fee of 3% of his starting balance. John called me somewhat frustrated and said that he'd be willing to set up an account with me, but how would it make sense if in addition he'd have to pay my advisory management fee?
That was a good question because it certainly doesn't make sense to have an account in any type of market environment and pay about 6% in fixed annual fees.
However, what John didn't know was that if you have an account with a registered investment advisor who is affiliated with custodial broker, the fee structure changes.
What did that mean to him? It meant that I opened the account for him as a new client. He now has no annual fees, other than my management fee, and his 180 day holding period for mutual funds is reduced to 90 days, minimizing, if not eliminating, the likelihood of an early redemption fee.
The net result was that he would receive the benefit of my experience-which he already trusted based on my track record of pulling clients out of the market in October 2000-and it would cost him no more, and likely less, than his discount brokerage account.
Needless to say, John was very relieved. In essence, he traded broker garbage fees for professional management at no additional cost to him.
And, since he itemizes his deductions on his tax return, all fees paid are tax deductible, which is just an added bonus to factor into the equation.
It turned out to be an all around win-win situation for John. I encourage you to review your situation and see if what looks like a discount in fees is actually costing you a premium.
About The Author
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com; http://www.successful-investment.com
recurring maid service Buffalo Grove ..Profitable day traders recognize that momentum trading is among the... Read More
Let's discuss commodities; with the latest Enron situation, it is... Read More
On November 17 I bought 7 different mutual funds and... Read More
Whenever I see mutual fund comparisons in the trade publications... Read More
Has your broker been calling you recently with the "great... Read More
Unfortunately, most of you who are reading my column are... Read More
Question: How does it get better when it gets worse?Last... Read More
When it comes to 401k's there is an overabundance of... Read More
I made my very first investment in the stock market... Read More
Because there are so many stocks that are NOT paying... Read More
This is a guide to the different types of mutual... Read More
Every year I go to the Money Show in Orlando,... Read More
Before you buy another car you walk around the lot,... Read More
Mutual fund investing is a lot like Thai cooking. Everyone... Read More
Every broker and financial planner will tell you that you... Read More
Everyone who invests in the stock market wants to be... Read More
I often hear from people, "I don't trade. I invest.... Read More
Now where have I heard that before? I know. It... Read More
Right now there doesn't seem to be any "gold fever".... Read More
Four blind men were asked to give a description of... Read More
On Friday or Saturday evening my wife gets a movie... Read More
If you don't know what a Roth IRA is then... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
When you become interested in a stock or mutual fund... Read More
Every day I see in the financial section of newspapers... Read More
premium house cleaning Glenview ..For years I have been saying you must have a... Read More
Look back over the years and try to remember how... Read More
Did you run out to buy that duct tape yet?... Read More
Since I can remember, and that's a long time ago,... Read More
What can I expect to make my first year of... Read More
Several times each month I am solicited by various market... Read More
With all the bad news that has been dumped upon... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
Last time we looked at the real performance of the... Read More
I cringe every time I hear a novice investor tell... Read More
One of the main reasons many of us get into... Read More
For years investors have been taught to look into the... Read More
Outlined below are some of the advantages and disadvantages of... Read More
I love roller coasters. The steeper the better. High and... Read More
When most analysts, financial planners, fund specialists and investors try... Read More
Ever jumped out of an airplane? It's OK if you... Read More
IT'S REMINISCENT OF THE OLD children's tale about an old... Read More
Every stock market investor faces one primal enemy. An enemy... Read More
For the year 2000 we have seen hundreds of mutual... Read More
There are red lights, green lights, blue lights and spot... Read More
I go to the Money Show every year to visit... Read More
We all know that emotions control every decision that an... Read More
Before they go over the cliff to their destruction these... Read More
Most advisors will tell you they can beat the market.... Read More
Someday you may want to retire and continue to live... Read More
Stocks & Mutual Fund |