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Ed Meek
CEO/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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Investment Management Fees: How Much Do You Pay?

What you don't know could cost you

| BY Catherine McBreen

Do you understand the investment management fees you are paying to your advisor?  What about the fees that you pay for your mutual fund investments?  Are fees important to investors or can they brush off the fees if performance is good?

In research conducted by Millionaire Corner with investors that had over $500,000 of assets, it became very clear that fees are important.  Fifty percent of investors felt they were important and as their wealth level increased, so did their belief that fees were critical.

Almost 75 percent of investors believe their fees are too high, especially those who do not have a primary investment advisor.  Perhaps it's easier to overlook fees if you find someone you like and trust.  Slightly over half of investors felt that they had a strong understanding of the fees charged to their accounts.

Seventy nine percent of the investors surveyed owned mutual funds.  Of those who owned mutual funds, 51 percent understood the concept of Share Classes.  Eighty two percent felt they understood Investment Management Fees, and 19 percent understood 12b-1 fees.  Share Classes indicate a charge that is included in the investment made up of multiple different charges.  Different share classes have different returns based upon the share class.  Investment Management Fees are generally a basis point charge made against the assets that generally varies by the amount of the account.  12b-1 fees are a sales charge that is used to pay the broker or other advisor that sold the product a commission.  All of these types of charges should be disclosed in the materials provided to you via an advisor or via online information.  Make sure you understand how you are paying fees, because, rest assured, you are paying fees in some manner.

A Mutual Fund Wrap account is an account made up of various mutual funds invested or wrapped together in an account to meet your personal objectives.  About 28 percent of the investors surveyed had a mutual fund wrap account.  Most (19 percent) believed they were paying 1.5-1.99% basis points for this account but 46 percent did not know what they were paying.

Forty one percent of investors surveyed owned a Managed Account.  This is an account managed by an advisory firm with a mixture of stocks, bonds and mutual funds tailored to meet your specific needs.  Forty two percent did not understand what they were paying for this account but 20 percent felt they were paying 1.5-1.99 percent for their management fee.  Eighty four percent had the fees deducted directly from the account while 3 percent paid the fee from a checking account and the remainder had different payment methods. 

Are the fees paid more important than performance?  Not to most investors.  Only 10 percent of investors felt the fees were more important than performance.  This is consistent with other Millionaire Corner research which indicates fees, while important  are merely one of the factors in the selection process.

While you mull your future investment decisions, keep in mind that fees are often difficult to understand.  Make sure you understand your fees and weigh them against the historical performance of that particular fund or investment.

About the Author

Catherine McBreen

Catherine S. McBreen is President of Millionaire Corner.  McBreen plans and develops content for Millionaire Corner.  Catherine balances editorial content to meet the informational needs of both new and seasoned investors.  She designs special monthly surveys on topical issues affecting the economic environment.

McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law.  She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.

Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences.  She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth.  Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.

McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)

Catherine is the mother of four and is involved in many school and community events.