Originally shared on LinkedIn
Here is how a $3.7M portfolio can end up paying $18,500 a year in “hidden” fees at big institutions.
The Problem:
You think you’re only paying 0.83%, – the AUM rate they quoted you. But this could significantly understate how much your big institution advisor or “Private Client Banker” is actually pocketing from your family.
The Math:
Here is an illustrative, hypothetical example of how much hidden fees on a $3.7M portfolio could be siphoning away:
– $9,250/yr at 0.25% in hidden costs
– $18,500/yr at 0.50%
– $27,750/yr at 0.75%
Where are the hidden fees? This is where things eerily mirror old school advertising industry practices:
– “Below the fold” internal platform fees
– Behind the scenes sales kickbacks (often categorized as 12b-1 fees)
– Trading desk spreads and other internal fees
The Solution:
Take a very close look at your invoices and statements. Fees can be obscured in a variety of ways, like reporting only “net performance” which hides the drag of additional, internal fees.
It is important to perform this audit with any advisor you work with—including us. Transparency should be a requirement, not a preference. We believe investors should know exactly how much they are paying their advisor so they can make an informed decision on whether the value matches the cost.
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Disclosures: Kangpan & Co. a fee only, registered investment advisor. Hypothetical example for educational purposes only; underlying fund expenses and internal trading costs may vary by institution. Not investment advice.