When was the last time you read the emails your 401(k) provider sends you, or downloaded the prospectus for a fund you’re invested in? Last year? When you first signed up? Never?
If you haven’t, then you likely don’t know what fees you’re paying. In fact, 53 percent of Americans with investment accounts can’t locate the fees on their account, according to a new survey from NerdWallet. And that can mean missing out on a lot of money over the long term.
So, how do you find them? There are a few ways. First, you’ll need your account login information.
Advisory Fees
If your account is actively managed (including by a robo), then you are likely paying an advisory fee, based on your total assets under management, or AUM. Usually, it’s a fraction of a percent, like 0.25 percent or 0.5 percent. It may be expressed in basis points. One basis point is equal to 0.01 percent. So 0.25 percent is 25 basis points.
You can usually find this by googling the advisor/robo and “advisory fee” or checking their website. You want to find something below 1 percent, which is easily doable given the number of advisors and robos available today.
Expense Ratios
Expense ratios are your biggest concern. These are the management fees charged by the fund company for investments like mutual funds and ETFs. For example, if you’re invested in the Vanguard 2055 Target Date Fund, Vanguard charges an advisory fee of 0.15 percent. Again, you can easily find expense ratios under 1 percent, although simply having a lower expense ratio doesn’t automatically make the fund better.
This fee won’t be listed on your statements, however it is fairly easy to find. If you have Fidelity, for example, you can login to your account, click on the name of one of your funds, and a summary of that fund will pop out in a new window with the information.
If you haven’t invested in the fund, you can simply google the fund name, and you’ll typically be able to find an overview of the fund on the fund manager’s website with all of the information you need.
You can also find most of the information by searching the fund on Morningstar’s website. Type the fund name into the search bar and then click over to the “Expense” page. Scroll down.
Typically, bigger companies like Vanguard and Fidelity can charge lower fees than smaller firms, and passively managed funds will be lower than actively managed funds.
It’s expressed as an annual percentage of the assets you have invested in that fund. To use the Vanguard 2055 example, if you had gains of seven percent for the year, for example, your net return would be 6.85 percent.
Administrative Fees
Your plan administrator may also charge a retirement plan fee on top of the advisory and expense ratio fees. This is the fee for simply administering your account. You can find this on your quarterly statement.
Bank Account Fees
Finally, while these aren’t investment fees, they’re also important. Bank account fees are easy to find—they’re listed on the bank’s website and on your monthly statements. If you find that you’re paying a fee of any kind to have an account at a specific bank, then get a new bank.