Is my financial advisor ripping me off?

Far too many people are wasting money on fees from advisors.  Here’s a question we received:

My coworker is using (advisor name withheld) and I asked to see his portfolio. He’s got a Roth IRA and a taxable individual account, both invested in only two funds. JVACX & JGACX, a large cap value fund and a large cap growth fund, both with expense ratios of 1.74% according to Morningstar.

Their fees are not well disclosed on their website, so I’m wondering if they’re commission based. I want to warn my coworker that his advisor has him in a poorly diversified, expensive, under-performing portfolio, but I want to hear from you​ first.

Yes, this is a common practice among advisors; they put you in funds which essentially mimic the S&P 500 and charge exorbitant fees simply for the privilege of having these professionals monitor your money.

According to Morningstar, both funds have a 1% sales charge on top of the 1.74% expense ratio. Since one is a large cap value fund and the other a large cap growth, together they basically equal an S&P 500 index fund, just with lots of fees piled on top!

You don’t need a financial advisor. You can accomplish the same, if not better results, simply by buying the S&P 500 directly on your own.

Remember, Warren Buffett suggests that everyone you should have 90% of your money invested in a low-fee, S&P 500 index, and the remaining 10% in cash or government bonds.

If you aren’t willing to listen to (arguably) the greatest investor of all time, you could simply follow generally accepted advice and set up an asset allocation based on your age.

Some will argue that young people — Millennials — should have all of their money invested in an S&P 500 fund.

Tell you friend. Heck, tell all your friends. You don’t need a financial advisor. You can invest your money by yourself. It’s easy. You can do it.

 

 

image credit: HAMZA BUTT

Add Comment