Your financial adviser may make as much money from your retirement account as you do!  That’s what happens when advisers put you into mutual funds that perform well, but charge excessive fees along the way.  Those fees can add up – especially when you consider the “opportunity cost” of what the money could have earned along the way.

Consider this example:  An investor put $100,000 into a large cap growth fund twenty years ago.  The fund earned an average annual return of 8 percent.  After 20 years, the account should have grown to be worth $ 411,580 — if she had purchased it directly from the fund company, on a “no-load” basis, with only minimal annual costs.

Instead, because she purchased through a broker/adviser/salesperson, at the end of 20 years the account was worth only $ 332,809 — a difference of $78,771!  That’s the true impact of excessive costs over the years!

This wasn’t some shoddy mutual fund that charged exorbitant fees.  It’s the Fidelity Large Cap fund – easily accessed directly at Fidelity.com, with no upfront fee to purchase, and a small annual management fee of 0.62 percent.

But when “advisers” help you choose a mutual fund, they have a choice of “share classes” – and each class has its own set of fees attached — for the very same mutual fund! 

The investor in our example was sold the Fidelity Large Cap Adviser fund “C” shares.  This class of shares doesn’t have an up-front fee, but does have much larger annual fees of 1.67 percent eating into your returns — along with potential “back-end” fees if you sell within a year (used to pay the broker a promised commission).

The same fund has Class A shares, which charge significantly higher annual fees — 0.91 percent compared to 0.62 percent in the no-load fund — <<and>> an  “up-front” charge to purchase the shares starting at 5.75 percent for investments of less than $50,000, dropping to 3.50 percent for investments of $100,000 (illustrated in the example above).

Or a broker could sell the Class M shares of this same fund, which carry a combination of front-end commissions and annual fees of 1.17 percent – making them more expensive than Class A shares, but less expensive than Class C shares!

You might be confused by all of this.   Or you may never have realized these share classes exist.  But you can be sure your broker/advisor/salesperson knows the costs very well, because they translate into his or her compensation for selling you the fund.

Since the Fiduciary Rule never became law, it is not illegal for stockbrokers to sell expensive funds. Unlike Registered Investment Advisers, who are fiduciaries obligated to divulge all costs and put your interests ahead of their own,  the salesperson is only obligated to find you a “suitable” fund – no matter what the cost.

You can compare the fees you’ll pay in various share classes using the FINRA fund analyzer tool at www.FINRA.org.   But that tool doesn’t show the “opportunity cost” of the fees that were paid either at the start, or along the way, strangling your account growth.

Now, James W. Langston, founder of Fiduciary Integrity LLC,  (www.FiduciaryIntegrity.com), has created a service that will look at your mutual fund portfolio and tell you exactly how much money you lost out on along the way by investing in shares that were unnecessarily expensive.   For a fee of $99 you can see the impact of those costs – and present your broker with a bill!

The SEC says investors who think they have been “overcharged” should “raise the issue with their financial professional and contact the SEC hotline” at 800-732-0330.  But the SEC has a sorry record of protecting individual investors against the brokerage industry.

What about a lawsuit?  Well known class action attorney Clint Krislov (www.KrislovLaw.com) laments that most brokerage clients give up their right to sue, by signing arbitration agreements when they open an account.  But, Krislov says clients can win in arbitration, and his firm has set up a special division to handle cases involving mutual fund costs.

Sadly, Wall Street laments the fact that Americans haven’t saved enough for retirement. One reason is the huge toll they extract from investors. And that’s The Savage Truth.