When creating a savings plan, many people factor in an amount that they would like to invest. However, few people know how to factor in an investment fee. That’s right. It costs money to invest money.
Transaction fees versus ongoing fees
For those with an investment account, take a look at the annual report that is sent. Some firms will send a quarterly report as well. If this is the case, evaluate all documents together and identify any fees that appear on the statement. Specifically, there are two types of fees to look out for. Transaction fees will be those that occur when stock is bought or sold. At many investment firms, these fees may be waived for the first 25 transactions or so, but then cost a certain dollar amount or percentage of the sale, whichever is higher. Don’t be surprised if an affordable investment account suddenly becomes less once the trial period of 25 trades is over.
Other fees are less surprising.
These are the ongoing fees, which are generally a simple percentage of the total investment portfolio. However, these fees will increase as the portfolio increases, so while there may be more money, the account holder is also spending more money to maintain those finances. Additionally, brokers or financial advisors often make commissions off of the money they manage. In order to avoid this fee, consider investing in a no-load fund, which will cancel out this cost. If those funds do not meet the needs of the account holder, however, negotiate with a top financial advisor to lower this fee. Such advisors will often be willing to do so, especially if the account holder is a regular contributor to their account.
Many firms often offer the same fee amounts as other firms in order to remain competitive, so remember to shop around. By informing one broker of one’s knowledge of the market, they will have incentives to reduce the account holder’s rates and keep their business. If they are unable to reduce these rates, a top financial advisor may be able to negotiate on behalf of the account holder. He or she will be knowledgeable about other benefit packages the company offers, and can hopefully add some of those benefits to the account in order to make up for the transaction fees they were unable to waive.
Request a lower fee
Simply let the broker know that there is unhappiness with the current account’s fees. Since the company is making money off of commissions and trades from these investments, they will want to keep this money in house. By letting a top financial advisor know that there is a possibility that the account holder is considering switching accounts, they might offer to reduce the fees. If they do not, simply ask. The worst they can do is say no. In that case, the threat to switch accounts may actually become a reality.
This might be a bit more complicated than anticipated, as switching accounts also carries some unexpected fees. The account where money is being moved from may not result in a penalty, but the account holder will have to pay government taxes when they liquidate these assets. There could also be fines for leaving the account, in which case the account holder is hit from both ends. Thus, it may not be financially worthwhile to leave a current account. In other words, simply avoiding paying higher fees on the original account will save more in the long run than switching accounts will.
As such, when money is moved into a new brokerage account, make sure that the new company is offering some benefits for moving the money around. For instance, not only should an account holder start off with the 25 free transactions, but the firm may also be able to reduce the brokerage commission and provide access to a top financial advisor for a discounted rate.
In order to locate a top financial advisor in the local service area, take advantage of the Financial Industry Regulatory Authority (FINRA) website. Use of the website is free, and can give information about brokerage firms and even individual brokers. A client can learn which brokers are trustworthy and charge the lowest commissions, and can even research firms that charge the lowest fees for each type of account they offer. Finally, FINRA can recommend fee-only advisors, who do not charge a commission but will still require payment of investment fees.
To learn more, consult with a top financial advisor, who has experience negotiating these financial moves, and who can provide advice on the best location for investments.