How can I ask this tactfully?

I believe if you look at the prospectus for each fund it shows what the fee is. Is the fee = commission?

@jca I suspect so but that would be impossibly time consuming and I don’t keep the prospectuses (prospectusi?).

When shopping for mutual funds, you can ask ahead of time what the management fees are, and also how much commission is paid to the account executive. It’s a fair legitimate question, and one that should not be found to be offensive. A good account executive knows that you should understand how much it all costs, because it affects the real rate of return.

Same thing when buying individual stocks. You can ask how much is being paid in exchange and regulatory fees, and how much commission is going to the firm. Those amounts are also clearly identified on the confirm.

A good account executive wants the customer to know the fees ahead of time, because it means there won’t be a dispute or complaint later.

@janbb Look at your 1099 that has your income tax info on it. It’ll list the fees.

Great solutions @zenvelo and @Adirondackwannabe . I’ll check my 1099 today and ask some questions going forward if need be.

This is prompted partially by the fact that the government is looking to ensure more transparency on fees for retirement investments.

Oh memories, of the way things were. haha
Yes, I was going to mention your 1099 as well.
Once you find out then you can always employ humor, tell him that you see his commissions are quite substantial and that you’re sure he is just dying to take you out for a steak and lobster dinner with a couple bottles of the Dom. lol

I do my MIL’s taxes, saw her consolidated 1099 statement and was horrified to see what she paid her “financial advisor”. It really pisses me off. She likes him so I said nothing. He also made a recommendation that boasted 2.75% APR interest But in tiny print I noticed it mentioned a fee of 7% of the total if the funds were removed within 3 years! You know he got a cut of that one.
I go with a group of index based, very low load funds and keep my money to myself.

“What is the commission you are making on my investments?”

You have the right to know what you are paying him. If he gets offended or is evasive, find another adviser.

Well, he had called today so I did just ask him to figure that out. In a friendly but clear way. I had looked at the 1099 briefly but it wasn’t that clear to me how to read it. He’s supposed to get back to me.

@janbb If he does much trading the 1099 will be around 10 to 15 pages. The fees will be the last thing on the very last page most likely.

Ok – thanks. It was long.

Be sure to look at transaction fees. Some funds charge a fee to sell them if you own them fewer than 90 days or 120 days or ?. Those fees are taken right off the top. The transaction charge is well hidden. You sell one fund and buy into another fund but unless you know the price at that instant of sale you can’t easily tell what you paid.
Unfortunately with such a system there is incentive for the money manager to churn the account.

You are the client. It would be irresponsible of you to not ask.

Last night, I was reading the Economist, Apr18th-24th, and on Page 67 there was a relevant article entitled: Seller beware. The government tightens rules for firms helping Americans save for retirement
Excerpts:
“Lawyers and doctors are legally obliged to act in their clients’ best interests and now stockbrokers will have to as well.”

“The new rule would replace stockbrokers’ current obligation to ensure that the investments their clients make are “suitable” with, as Barack Obama put it in February, “a very simple principle: you want to give financial advice, you’ve got to put your client’s interest first.”The problem is that many are paid commissions by the asset managers they recommend and thus have conflicts of interest; what is best for them is not always best for clients.”

“One study sent “mystery shoppers” to advisers who were paid such commissions; even when the shoppers had portfolios of low-cost index trackers (which most academics would recommend), they were advised to switch into funds that levy higher fees. Because 401(k)s tend to have lower fees than IRAs, a saver who shifts their money from one to the other may lose as much as 12% of it (and so will receive 12% less a year in retirement).”

“The rule as proposed is 120 pages long and includes enough “carve-outs” and caveats to give lawyers and lobbyists plenty to work with. There are exclusions for “order-taking” and “educational material”, which may sound benign but could in clever hands be used for unscrupulous marketing. A further 114 pages are needed to explain how customers can be charged. Commissions from asset-managers are not ruled out, but must be disclosed.”

I did not see when this new rule is to go into effect.

@LuckyGuy Not a coincidence. It was hearing about this pending legislation on NPR – not passed yet – that raised the question in my mind.

There you go! Since it’s not passed yet that means what we have out there now is even more predatory. I would carefully scrutinize how many transactions were made and see how much you paid in commissions for each trade. He might say he got nothing. BUT the fund manager might be collecting a large fee and kicking back some to him.

No matter what he says, your guy is not doing it for free. See that office with Michelle and Jason typing at their desks? You pay for that. You also pay for the six 27 inch diagonal monitors he has mounted in two rows of 3 in front of his desk so you think he is watching constantly and is right on top of the market. Baloney! He is putting in stop loss and limit orders just like you can.

I am a cheap, suspicious bastard and don’t like anyone getting in my business or fiddling with my money.

@LuckyGuy Got it, but not really the question I was asking about. I am not so naïve nor as suspicious as you and I realized he was working for money.

Got the information and am talking to him about bettering performance vs. commission. Will also look into putting some money elsewhere perhaps.

Thanks for all the helpful suggestions!

Check this fund out.

Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Shares (VNJTX
)

@gailcalled Yes, you had mentioned that once before and I had mentioned it to my FP but I am going to look at it again. I may well throw some money in there.

You don’t need your FP for that.

Yes I know. I was asking his advice at that time.

You don’t need a FP to open a Fidelity account and buy Index funds: Total market, International, Mid Cap, and Bonds is a nice conservative mix. And the loads (fees) are very low. 0.015%. to 0.06%

Please let us know what happens. You would be helping more people than you know.