New disclosure requirements for investment returns and advice fees seem to have energized people to take a closer look at their finances.
Statements arriving this month should include an account in dollar terms of fees paid for investment advice, and personalized returns for at least the past year. People in the investment industry are expecting this new information to leave some investors agitated, and early indications suggest this is happening in a very broad sense. Everything advisers are doing is being scrutinized. Here are a few quick examples from this month's crop of reader e-mails:
One reader contacted me recently about the fees charged by her adviser. What stuck out was not the amount of the fees so much as the nonsensically complex way they were presented to the client. Different percentage fees for bonds, stocks and mutual funds. This reader couldn't get a handle on the total percentage fees for her various accounts, and neither could I. Fees expressed in dollars are a welcome addition to account statements, but people also need a clear, all-in fee expressed in percentage terms. Demand both from your adviser.
Deferred Sales Charge Mutual Funds
There has been a long, steady drop in the sales of DSC funds, which charge a gradually declining redemption fee if you sell it in the six or so years after buying. But some advisers cling to this noxious sales option. I recently heard from one investor who claims to have been sold a DSC money market fund, an unconscionable thing for an adviser to do if you accept that money market funds are temporary parking spots only. DSC funds are a vestige of a more predatory time in the investment industry. They have no place in today's portfolios.
Treating clients like chumps
This is a relatively benign example, but it does serve to remind clients to verify what their adviser says if there any doubts. A reader contacted me a couple of weeks to ask where to find total return data (dividends plus share price changes) for major stock indexes. This individual had been told by some investing "pros" that total return data is hard to find. Wrong. It's easy to find. You only say it's tough to locate if you're trying to hide how weak your results are as an adviser.