This book includes a plain text version that is designed for high accessibility. To use this version please follow this link.
fi nancialforum Know the Costs U


Mutual Fund Costs There are numerous costs associated with having mutual funds. MOAA’s Mutual Fund Calculator can help you analyze the expenses. Visit www .moaa.org/calculators, and click or scroll to Investment Calculators.


56 MILITARY OFFICER JANUARY 2016


Do you know how much you’re paying for fi nancial advice? There are many possible charges of which you might not be aware. By Lt. Col. Shane Ostrom, USAF (Ret), CFP®


Unlike most consumer purchases, fi guring out the cost of fi nancial advice and investing can be like an Indiana Jones expedition. Do we really know how much we pay?


Some advisors quote a fi xed price for the job desired. Suppose you want a com- prehensive fi nancial plan that considers savings, investments, retirement, insur- ances, taxes, and estate-planning issues. That might cost $3,000, for example. The price varies based on the job’s complexity. Or you might be quoted an hourly rate and told it will take eight hours. Some places charge a percentage based on assets under management (e.g., 1 per- cent). It is common for the percentage to decrease as asset amounts increase. Think volume discount. Your advisor might charge a commis- sion. This is a sales charge applied to each transaction, such as a buy or a sell. This could be a favorable payment method if you don’t expect to have many transac- tions. For instance, you buy an exchange- traded fund through your online broker for $8. A full-service broker will charge more, but you get extra service for the extra cost. Some investments and products charge


an up-front sales charge, called a “sales load,” which is applied by the company that off ers the product, not your fi nancial advisor. Say you buy a mutual fund in your account. An up-front sales charge might be applied by the mutual fund company.


Some companies off ering products also apply back-end or surrender charg- es. If you buy a mutual fund or an annu- ity, for example, and later sell all or part of it, you are charged a fee to get out of the product. Your investment or insurance product


charges fees to own or hold the product. Mutual funds have annual management fees, 12b-1 services (marketing fee), and possibly other miscellaneous fees. Insur- ance products have administrative and in- surance fees. Insurance products include the insurance charge (called mortality- and-expense or cost-of-insurance fees), surrender fees, option/rider charges, and management fees within the mutual funds within the insurance product. This is an abbreviated primer. There could be other charges. Most likely, you are paying several layers of these fees. For example, you could pay 1 percent of as- sets under management, an up-front sales charge, and costly mutual fund annual management/12b-1 fees. Hopefully not. In- surance products in individual retirement accounts can get expensive. All of this is spelled out in the fi ne print


of your account contracts and prospec- tuses. Your fees should be consistent with your planning objectives.


MO


— Lt. Col. Shane Ostrom, USAF (Ret), is a CFP® and benefi ts information expert at MOAA. Visit www.moaa.org/fi nancialcenter for other re- sources. Email specifi c benefi t and fi nance inqui- ries to beninfo@moaa.org.


PHOTO: SEAN SHANAHAN


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96