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This brief article introduces the topic for this article.  Since I will be looking at the issue of the reasonableness of investing fees from the viewpoint of individual investors saving for retirement or currently in retirement, I will devote separate articles to these groups.  Our journey will be an exploration of whether or not the fees you are paying to a financial professional are reasonable.  Furthermore, we will examine how the expenses affect your overall investment performance and reaching your financial goals.

Most financial professionals are charging clients based upon assets under management (AUM).  The most common fee is 1%.  For example, the fee for a $1 million portfolio would be $10,000 ($1,000,000 * 1%).  Now you have heard me talk about the importance of keeping fees as low as possible.  Essentially you are trying to maximize your investment returns each year.  If you have quite a few needs, a Financial Advisor usually can provide a number of different services and advice.  For example, you also may need assistance with legal and tax advice.  Additionally, you may have more complex financial planning needs.  Financial professionals will assist you with portfolio allocation always.

With that being said, I am going to look at AUM fees in a way that you may not be familiar with.  A significant number of induvial investors do not need all the services that financial professionals offer (e.g. tax planning, trusts, charitable giving, and more).  I can tell you already that the financial services industry is not happy with and/or does not agree with this presentation.  However, my only goal (the overarching goal of a good portion of my blog too) is to help you and provide you with an argument that may finally give you the impetus to manage your own investments or think seriously about working with a financial planner that charges fees on an hourly basis or a flat fee.

I also encourage you to read The Wall Street Journal newspaper for October 5, 2012.  On the bottom of the Business & Finance section, Jason Zweig discusses the many conflicts of interest that Financial Advisors have.  FINRA (a Self-Regulatory Organization comprised of all brokerage firms) issued a 22,000-word report about fees, conflicts, and compensation of Financial Advisors.  Oddly enough, the words “advice” and “investing” showed up less than 10 times.  The financial services industry is concerned about this matter, so you should take note and learn much more about what you are paying for.

Here is a link to the above article:


The next article will start off with individual investors that are currently in retirement.  Then another article will come out which discusses the same ramifications for individual investors that are currently saving for retirement.