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Author: Northern7 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76422  
Subject: Confused regarding fees. Date: 7/27/2005 2:42 PM
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Back on the 21st there was a thread on high fee accounts.

The August Kiplinger magazine has a brief article re fee based accounts which they note is when an annual fee is based on the assets in an account.

Unfortunately, that's what I had for a few years.

Would those two fees be the same? How many different fees are there?

I could use a good summary of fees as it is definitely a confusing issue.

Could anyone here delineate them, or provide a ink to where someone has summarized them.






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Author: billyturtle Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47051 of 76422
Subject: Re: Confused regarding fees. Date: 7/27/2005 10:09 PM
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I can tell that you're confused, but without a little more information no one here will be able to help you.

So you had a managed brokerage account that charged you an annual fee based on your account assets. The number I hear most often with this type of account is 1%, but it might have been more. You would have to name the brokerage or look up your old paperwork to find out how much that fee was.

There are tons of fees out there.

Account fees -- Low balance, too many trades, too few trades, maintainance, custodian, closing
Transaction fees-- Costs for buying or selling an equity or bond
Mutual fund fees -- Expenses, front load, back end load, 12-B-1


I was about to sign up for a 403b with Lincoln Financial, btu then I read the agreement. They were going to charge 1.73% per year of my total assets. On top of that, the mutual funds I could choose from charged 1.5-2% fees of their own. Then they were going to charge me a 10% surrender fee if I moved my money to a rollover IRA within 10 years. Needless to say I walked away from that plum of a deal.

Low balance - some companies will charge you a fee if your balance drops below a certain threshold like 1K or 10K.

# of trades - some companies try to get you to trade more others want you to trade less. They will charge a fee to encourage you to act this way.

maintainance - the company passes on the cost of running your account to you. Sort of like paying shipping and handling.

custodian - same as above maybe $10/year

closing/surrender fees - fees for closing your account. might be huge, might be small.

transaction fees - discount brokers charge $7-14. The big boys could charge $100 or more per trade. A but is one trade. A sell is a second.

Front load - a fee for buying shares of a mutual fund. for instance 4% load. You deposit $10,000 but your balance will only show $9600.

Back end load - fee for selling shares for instance 4%. You sell $10000 of the fund and only get a check for 9600.

12-b-1 fees- this is a bogus extra fee that they can charge. Can be as big as they make it but it must be under .25% to be considered a no load fund

expenses - the cost of running the mutual fund gets passed onto the shareholders. This pays for the company's transactions, salaries of workers, mailings, paper clips, you name it.

Hope that helps a little.

billyturtle

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Author: Northern7 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47056 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 8:20 AM
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Ok, that was pretty good. Have a handle on all of them, except the 12-b-1 fee. That's still a mystery.

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Author: billyturtle Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47059 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 10:31 AM
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It's a mystery to me why fund companies get to charge 12b-1 fees. It's just a fee on top of the expense fess they already charge.

According to http://www.investorwords.com/4/12b_1_fee.html

12b-1 fee: An extra fee charged by some mutual funds to cover promotion, distributions, marketing expenses, and sometimes commissions to brokers. A genuine no-load fund does not have 12b-1 fees, although some funds calling themselves "no-load" do have 12b-1 fees (as do some load funds). 12b-1 fee information is disclosed in a fund's prospectus, is included in the stated expense ratio, and is usually less than 1%.


Essentially it's an extra fee to cover marketing.

billyturtle
who thinks this is bologna

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47064 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 1:18 PM
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Essentially it's an extra fee to cover marketing.

Isn't that how they pay for all those TV ads on CNBC and Bloomberg, and the advertising, private room admission, and corporate boxes at the high-profile sports events like the U.S. Open (golf and tennis) ;-)

2old



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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47065 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 1:49 PM
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I need to startup a fund so I can collect some of those fees. Maybe I'd call it "Hedgehog's Heapin' Helpin' of Hequities"? :o)

Hedge

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Author: bighairymike Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47067 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 2:45 PM
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I need to startup a fund so I can collect some of those fees. Maybe I'd call it "Hedgehog's Heapin' Helpin' of Hequities"? :o)

Hedge



I can tell this would be a load fund.... quite a load!

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47070 of 76422
Subject: Re: Confused regarding fees. Date: 7/28/2005 9:47 PM
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Another interesting point is that sometimes a fund that charges a 12-b1 fee closes to new investors. They then are not doing any advertising. Do they eliminate the 12-b1 fee? Nope!
It is just another way the fund company can make some money. Run, don't walk!
Best wishes, Chris

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Author: investinginstuff Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47074 of 76422
Subject: Re: Confused regarding fees. Date: 7/30/2005 1:59 PM
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One would think that advertising expense would fall under the management fees as a cost to "managing" the mutual fund. One would be wrong. With the advent of FOLIOfn, which allows you to build your own "mutual fund," mutual funds aren't as appealing as they used to be.

JLP

http://allthingsfinancial.blogspot.com

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