One thing that really annoys me about the financial services industry is the lack of transparency around fees. Visit almost any financial advisor’s website, and you’ll be hard pressed to locate the advisor’s fee schedule. The website will tell you all about why you should work with them, what services they offer, and their latest market insights. But where are the fees? It’s almost as if the advisor is telling clients, “We are so great, you shouldn’t worry about how much we charge!” But of course, that’s absurd.
This criticism applies to both independent registered investment advisors (RIAs) and large wirehouses with thousands of advisors or brokers. Across the industry, there does not seem to be much appetite for disclosing fees in an upfront manner. The question then is, why not?
The best answer that I can come up with is that advisors have significant discomfort defending their fees. They don’t want to put fees at the forefront of the client relationship, so they refuse to post them on their website. When they do talk about fees, advisors often try to take advantage of natural human cognition to obfuscate the real dollar cost of fees. For some reason, many advisors operate under the notion that by hiding their fees, their clients won’t pay attention to how high they are.
And you know what, often these advisors are right! To their detriment, many clients don’t pay attention to how much they are paying in fees! These clients will check their quarterly statements, and as long as the market is going up, they are happy. But this dynamic is changing rapidly. Thanks to the efforts of people like Jack Bogle, Jason Zweig, and many others, clients are becoming more educated and more aware of the negative effects of high investment and advisory fees.
What’s the point?
At the end of the day, fees matter. So does transparency. Your advisor should charge a reasonable fee for the value provided. Your advisor should also be upfront about their fees. And although I don’t agree with it, if your advisor charges the typical 1% of assets, that’s fine… as long as they always communicate your fees in real dollars and cents. And your advisor should post their fees in a prominent, easy-to-locate position on their website, just like we do.
I’m not sure why many financial advisors feel the need to hide certain aspects of our business. Clients know advisors need to earn a living, so why not be upfront with everyone so they can make the best choice possible? The last thing I want in my practice is for a client to work with me before knowing all the terms of the relationship, and then decide they made a horrible mistake.
If you can’t locate your advisor’s fees on their website, maybe ask them why they aren’t easier to find? If you value transparency and reasonable fees, consider using a flat fee financial advisor and give us a call.
