UlTImATE SUccESS GUIdEthan the advertised fees. The difficulty in computing the actual costs of
mutual funds is challenging even for experts in the field.
While most investors would check the expense ratio of a mutual fund-
-which is essentially the costs to own the fund that pay the portfolio
manager and operating expenses--that number is not the bottom line.
Looming above each of these mutual funds is a cloud of additional
transaction and trading costs comprised of bid-ask spreads, opportunity
costs, market-impact costs and brokerage commissions. Confused yet?
Many of these costs are not mandatory to report because the SEC deems
them too difficult to calculate due to the variances from fund to fund.
If the SEC thinks those fees are too hard to calculate, a client has little
chance of adequately doing so. It is prudent for an investor to engage the
assistance of a fiduciary advisor to navigate the hidden costs and risks of
mutual funds and other investments.
keY tWo: tRAnsPARent InvestMent goAlsA transparent investment goal balances on three things: an advisor as
the quarterback who calls the correct plays, a balanced portfolio that
generates a steady income stream and the ability to advise on invest-
ments with minimum costs and fees. The goal of an advisor should be to
manage the client’s investments and expectations with superior service
and with a mind toward minimizing the client’s risk.
As highly conservative and investment managers, we feel like we hit
our homeruns when the market is down because we protect the client’s
down side or blind side. Our philosophy is not to shoot for 12%to 15%
returns as other firms do, because that does not allow us to protect that
down side. Our experiences working in both sides of the industry estab-
lished our belief that no investor should put all the eggs in one basket.
Our fiduciary obligation to the client prohibits us from recommending
only certain investment options. For example, an insurance agent can
assist a client with retirement investing; however, he can only sell one
type of product. If the client has $1,000,000 to invest, that investment
will likely be made into an annuity because that is what the agent sells.
Conversely, a fiduciary advisor might recommend that some of that cli-
ent’s million-dollar investment, maybe 20 or 30 %, be invested in an
annuity and the balance in other investment options that will work to-