Managed accounts costs too high?
I have read your response to a reader that said paying 2 percent on a managed account is way too much. My question is, is 1 percent also too much? We currently have funds in managed accounts. When I have asked our broker about the monthly fees, he has reported that even with the fees, the managed accounts are slightly doing better than the unmanaged accounts. What are your thoughts?? Thank you very much in advance. Mardell
Terry Says
It's always worth paying for good advice. But you have to measure ALL the costs and the performance to find out if you are getting a good deal, and good advice! Start with costs. It's not just that annual management fee. You must ask the broker -- and the broker must reveal -- all commissions you paid to get into the investment (and potential commissions to get out of it, as well). Plus there are likely ongoing fees associated with some of the individual investments -- management fees for mutual funds, for example. All of that must be taken into the cost consideration. Then ask the broker to compare the performance of the managed account against a benchmark. For example, the typical benchmark for the stock market portion of your investment is the S&P 500 stock index. Last year the S&P 500 had a total return of 12% including dividends. Did the stock portion of your account do as well -- after all fees, but including dividends? That's the easiest way to compare -- because you could have gone to Fidelity or Vanguard and purchased an S&P 500 fund with NO commissions and only 0.05% (yes a small fraction of one percent) in ongoing management fees! Similarly there are indexes for bond performance, or for international investing, etc. But just start with the comparison of the stock investments. That should be revealing. By the way, who is managing the "unmanaged" portion of your portfolio????
