(Few People) Should Ever Pay Assets Under Management Fees
A good CFP could make sense, but for most people, AUM fees are a big ripoff
I have covered on this blog the aspect of fees, specifically how mutual funds tend to be magnitudes more expensive to own than a simple ETF that tracks the S&P 500.
Keep in mind, most of the holdings will be identical to, or very similar, so paying more for managed funds (which is most mutual funds), meaning fund managers are making active trades and decisions rarely makes sense unless you don’t have the option, such as in a company 401(k).
Many financial advisors will happily push you into managed funds, that surprise, they make money on! But for this article, I want to focus on fees applied to Assets Under Management (or AUM).
Most investment advisors, be they a CFP, CPWA, CWS, or WMCP, will ask you for compensation in the form of a percentage-based charge, on an annual basis, against the total amount of dollars in the investment account or accounts being “managed.”
Let’s set aside the fact that in 2023, it’s really inexcusable to not understand what your investment options are, or what historically has been the best place to put your money (hint: few professional fund managers can beat the S&P 500 year after year).
