Unmasking 'Double Dipping': Tackling Hidden Investment Fees for Financial Health
Aug 24, 2023Season 1Episode 8
Kimsey Hollifield
Ever wondered why your investment accounts are not growing as expected? Could hidden fees be gnawing at your hard-earned money? We're pulling back the curtain on the murky world of 'double dipping' in financial accounts - a practice that could be costing you dearly. We'll help you decode the complex financial jargon and guide you through real-world examples using Yahoo Finance. You'll learn how to spot the signs of double dipping, calculate your actual fees, and understand the impact of expenses like 12B1 charges and sales loads on your total investment costs.
But it's not all gloom and doom! It's time to take control of your financial future and stop the fee bleed. We're here to empower you with the knowledge and tools to challenge unjust fees. We'll walk you through strategies to reduce your costs and expose when fees are unfairly high. This episode is packed with actionable tips to help you navigate the labyrinth of account fees, so you can maximize your returns and secure your financial health. Don't let hidden fees drain your investments - tune in and take charge!
Ever wondered why your investment accounts are not growing as expected? Could hidden fees be gnawing at your hard-earned money? We're pulling back the curtain on the murky world of 'double dipping' in financial accounts - a practice that could be costing you dearly. We'll help you decode the complex financial jargon and guide you through real-world examples using Yahoo Finance. You'll learn how to spot the signs of double dipping, calculate your actual fees, and understand the impact of expenses like 12B1 charges and sales loads on your total investment costs.
But it's not all gloom and doom! It's time to take control of your financial future and stop the fee bleed. We're here to empower you with the knowledge and tools to challenge unjust fees. We'll walk you through strategies to reduce your costs and expose when fees are unfairly high. This episode is packed with actionable tips to help you navigate the labyrinth of account fees, so you can maximize your returns and secure your financial health. Don't let hidden fees drain your investments - tune in and take charge!
If you had to tell me right now how much you're paying in fees on your accounts, could you do it? Most people can't, but after this video, you will be able to tell me exactly what you're paying in fees on your investment. What are you doing? What Did you? Just double dip that chip? Excuse me, you double dipped the chip, double dipped. What are you talking about? You dipped the chip, you took a bite and you dipped again.
Speaker 1:
Hey everyone, this is Kim Z Hollifield with Hollifield Financial Group. Now, most of us have seen that clip with George Costanza where he goes to the party and he double dips his chip and he gets caught doing it. And I'm going to talk to you today about double dipping, but not in that sense. I'm going to talk to you about double dipping in financial accounts and what it means to you in the fees that you're paying, because many of you are paying double the fees of what you actually think. I see this all the time in my financial practice, where people come in and they think they're paying 1%. They're really paying 1.5% or 2.5% in fees on their money, and the reason is because of this double dipping. So what I want to do today is I want to go through some examples. I want to talk about what is a double dip account, who offers them and how to know if you have them. So the first thing I want to say is, typically, when you see these, they're going to be from accounts where your financial advisor says, hey, I'm going to charge you a 1% or a 1.25 or a 1.5% advisory fee. Now, sometimes that's all you pay, but a lot of times that's a fee to start you out right, and then all the things that you're invested in have other fees. So you have to be really careful. Are you just paying that one fee or are you actually paying fees to two or three or four more different places? So what I want to do today is I want to go onto Google and I want to just look up just like I do with clients that are in my office accounts that you might have or funds that you might have on your statements, and the first place that I go to is Yahoo Finance.
Speaker 1:
I love to take people to Yahoo Finance because it's an easy website to use. It's a very, very simple website to use and everybody can get on it, and you can go on there and you can look, and let's just look and see one that we see a lot of and I don't want to pick on any company in particular. I don't want to pick on any company in particular, but this is something that I see a lot. It was trending. And if you go on Yahoo Finance, well, first of all, if you go to your statements that you get in the mail and you look at all of your investments, you'll see these different codes and it might say ABC, tqqq, whatever it says. If you type that into Yahoo Finance right here, you're going to get to this page right here, very, very simple to do, and you're going to see all these different things about the investments that you have.
Speaker 1:
The one that we're looking at today is this one here called an expense ratio. The expense ratio is one of the fees that could be inside the funds or the investments that you have. There are three ways that you know if you're getting double dipped Expense ratios 12 B1 charges and the last is something called sales loads. So first let's go to the expense ratios. This is a fee that goes to this company here ProShares, ultrapro, this fund here, if you have this, this fund is being managed by someone else. So if you have this, this.86 is going to this company right here that manages this fund. In addition, typically, in addition to whatever fee, you're paying your local financial advisor. So if your man or woman if they say, hey, I'm going to charge you 1%, and you look on your statement and you have this fund here, you know that you're probably paying an extra.86. That means if you have $100,000 here, you're probably paying $860 extra in fees than what you thought.
Speaker 1:
Let's go here to one that's pretty common. I see a lot of American funds. I see a lot of American funds. Let's look here and just pick this first one here the growth fund of America. So that sounds really good and patriotic and American. So let's go here. Right, a lot of people have this the growth fund of American. Using what we know now about expense ratios and internal fees we can see again is this one has an expense ratio of 1.39%. So, looking at that same $100,000, if you have $100,000 in this fund right here and you know you do because it says A-G-T-H-X if you see that on your statement and there's $100,000 in here, you're paying almost $1,400 in fees to the managers of this company right here. And so what you typically are gonna wanna do is you're gonna say, okay, I'm gonna add that to whatever my local advisor is charging me, and now we're getting double dipped, right, you add those together and now that is your new actual fee, the actual fee, the actual dollar that you're paying. Let's look up one more. I see this company a lot. I see T-Row Price Now, t-row Price is not a bad company, but I see this a lot. We should all agreecomp.
Speaker 1:
''. This one seems fun here. The Global Technology Fund, all right. So the Global Technology Fund. They are going to invest in global technology companies, right? So if you go to your statement and you were to see this symbol right here PRGTX you can see that they have a 0.79.
Speaker 1:
So what I would urge you to do is, when you have time, take your statement, pull it out and just go through. Go to Yahoo Finance, very, very simply, and just see if you have expense ratios in addition to your advisor fees on your funds. And when you look here you can see, okay, you do have these. And the next thing that I want you to look at when you look at the expense ratios, then I want you to go over here to the profile and I want you to go down here and I want you to see if there is anything called a 12B1 Charge. A 12B1 fee is an annual marketing or distribution fee of a mutual fund. It's considered to be operational expense, such as including a funds expense ratio between this and this fee gets named for. So one of the things that a 12B1 Charge can be used for is marketing or distributing the investment.
Speaker 1:
So I want you to think about it this way. This is how I teach it in my financial classes when you're sitting at home at night and you're watching TV and the commercials come on. No, I don't know if we watch commercials anymore, but let's say it's one of those programs where you have to watch the commercials. And you're sitting there and the commercial comes on. It's an awesome commercial. And you know it's awesome because you're like, wow, I have money in that company. And you're looking over at your spouse and you say, isn't that an awesome commercial? Isn't that great that we have money in this company here and they have this awesome, great marketing commercial? From now on, when you see that, I want you to look at your spouse and say, isn't this an awesome commercial that we paid for? Because, really, a 12B1 Charge in the marketing and distributing of that fund.
Speaker 1:
They can pass off those expenses onto you, the investor. So you wanna look for that. The last one that you wanna look for is something called a sales charge. A sales charge is typically five to five and three quarter percent and that is charged either upfront typically it's upfront when money goes in. So those three charges, you kinda add those together with the advisory fee and then you can get closer to what your actual fee is getting charged to you.
Speaker 1:
Now, who offers these? These can be in a lot of different places, right? Typically it's mutual funds and exchange traded index funds, but they can be held in TD, ameritrade, fidelity, charles Schwab, so they can be in a lot of different places. So if you have an account with TD, ameritrade, schwab or Fidelity all companies that we represent now we don't do the double dipping accounts but all custodians that we use you could have these charges and we help a lot of people that have those three platforms Ameritrade, schwab of course they're merging and Fidelity, who actually wanna keep their money in those places but they wanna reduce their fees. Now how do you know if you have them? You can go online Yahoo Finance, you can go to Morningstar. You can go to a lot of these different places and look them up and try to average them out, and that's fine if you wanna do that.
Speaker 1:
We offer that as a free report Anyone who comes in to meet with us and we see that they have these accounts.
Speaker 1:
What we typically do is we do a fee report and it takes two or three days to get back, and when it comes back we can actually tell exactly the amount of fees that you're paying on your account and if we can reduce them.
Speaker 1:
And oftentimes we are able to reduce fees dramatically on your accounts, in some situations by thousands of dollars per year. And I think, as a financial advisor, one of the most important things that I can do for our clients is to try to keep, first of all, their risk a little bit lower in getting the return that they need and, second of all, keep the fees lower that they're having to pay out, because that is money that goes out no matter what. If we can reduce that, then you're in a much better place. So if you'd like our help, I'd be more than happy and my team would be more than happy to help you out. Please click the link below, you can schedule a 15-minute conversation. If you want help on doing it yourself, I'd be more than happy to give you guidance as well. So take care and I'll see you on the next video. You know how much I risk for your benefits.
