Hidden Investment Expenses

Wall Street is required to disclose expenses to you, but there is no regulation that says the expense information has to be easy to find, calculate, and understand.

Disclosed Expenses

Wall Street uses a "Hide in plain site" strategy. It knows very few investors take the time to read service agreements. So it buries the pricing information on page 30 and bets you will not take the time to fine, read, and understand it. Wall Street wins its bet at least 80% of time. Only a small percentage of investors know all of the expenses that will be deducted from their accounts. 

Undisclosed Expenses

Other types of expenses may not be disclosed because the services are provided by third parties. For example, your assets may be invested with third party money managers or mutual funds that charge asset-based fees (% of assets) that are in addition to the expenses that are charged by the Wall Street firms.  

Why hide expenses?

Wall Street would like to make expenses a non-issue. In reality they are a major issue: 

• The less you know about expenses the more likely you are to invest in Wall Street products that charge big fees 
• The higher the expenses the more money Wall Street makes from your assets

Why complicate expenses?

It is consistent with its "hide in plain sight" strategy. Wall Street discloses information, but uses terms that are not easily understood by the average investor. For example, a commission is called a load. A front-end load is deducted from your assets. A back-end load is paid by a product company that charges higher fees to recover the commissions that were paid to the advisor. A penalty for early withdrawal does not sound too onerous until you realize it lasts seven or more years.

Layers of Expenses

Wall Street has a lot to hide. There are layers and layers of fees, commissions, and transaction charges that Wall Street charges for its advice, services, and products. It has a lot of mouths to feed from the revenues it generates from your assets: Shareholders, Directors, Executives, Staff, Managers, and Advisors. And, then there are the $10,000 waste baskets.

Paladin Says.....

Get it in writing. Make the written disclosure of all expenses a mandatory requirement when you select firms and advisors to help you invest your assets. You want every penny of expense fully disclosed and documented. There are no exceptions. Any professional or firm that refuses to disclose this information should be automatically rejected or terminated.