By Indexopedia Research Team | September 30, 2024 | In
Most retail investment advisors charge investment advisory fees to invest in model portfolios, index funds, and ETFs. Because index funds, ETFs, and portfolio models are often managed by a third-party investment company, investors are subject to hidden expense ratios and trading fees. When investors pay an investment advisory fee in addition to the hidden fees of the funds, the total cost can sometimes be as high as 2.5% to 4%. All too often, when retail investment advisors discuss costs, they sometimes fail to disclose the real costs of the funds, which are not always transparent to investors. So, when you’re investing, especially in portfolio models, pooled mutual funds, or ETFs, be aware that you generally don’t need to use a retail investment firm unless they are actively giving advice. For example, if you’re using an investment advisor and paying them 1% for advice while being invested in a portfolio model of mutual funds, the 1% advisory fee is just a part of the total cost. Expense ratios, trading costs, and clearing costs are other expenses that may easily push your total cost to over 3.7%