Presented by Cody Kimble
As a financial professional, I’m encouraging people to get gutsy and ask themselves and their financial professionals a question they probably haven’t asked before: How much am I paying in fees?
It’s a question that you might expect would have a simple answer, but if you dig into it, you might find yourself doing a bit of head-scratching. In the world of financial services, there are different kinds of fees—trade commissions, fund fees, and advisory or management fees to name a few. While cost is only one factor when it comes to dissecting the value of an investment or your relationship with a financial professional, it’s important for investors to understand what they’re paying, and why and how these costs impact their returns.
According to Schwab’s 2021 Modern Wealth Survey, only about half of investors (56 percent) are aware of the fees and costs of their investments. But the fact is a seemingly small difference in fees can make a potentially big difference in your return, especially over time.
It’s important to understand, however, that not all investing fees are bad. It’s really a matter of understanding the value you are getting from what you pay. You might be willing to pay a slightly higher fee for different kinds of services that add value, such as more personalized financial planning or a higher-touch relationship. Maybe you’re a small business owner with a specialized set of financial needs that require more help and attention from a financial professional.
A couple of ways to be more aware of the fees you’re paying are to regularly review your statement and ask your financial advisor directly about the different fees you are paying, why you’re paying them and how they are impacting your financial goals.
Starting with these questions will help you become more knowledgeable and confident about your finances and the value you’re receiving. But don’t stop there! Keep asking questions and stay engaged, because these can be your most valuable assets when it comes to achieving long-term financial success.
Cody Kimble is a Financial Consultant at Charles Schwab with over four years of experience helping clients achieve their financial goals. Some content provided here has been compiled from previously published articles authored by various parties at Schwab.