Tags: Zweig | financial advisory | fees | Wall Street Journal

WSJ's Zweig: Exorbitant Financial Advisory Fees May Be on Their Way Out

By    |   Sunday, 21 September 2014 06:33 PM

In the pre-Internet days, you often had to pay your financial adviser a commission of more than 2 percent for a stock trade, and even now, you still must often give the adviser an annual fee equal to 1 to 2 percent of your assets.

But that may be changing, says Wall Street Journal columnist Jason Zweig.

"In a world in which the expected long-term return on stocks after taxes and inflation is 3 to 4 percent a year at best, . . . why, when you take all the risk, does your adviser take up to one-third of the reward?" he writes.

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"It doesn't have to be that way, and the death knell for such high fees may already be ringing."

Vanguard Group offers investment management and financial planning for a 0.3 percent annual fee, he notes. And some online services that offer automated advice are even cheaper.

"I've always said the last bastion of gluttony in the financial business is the advisory fee," Rick Ferri, founder of Portfolio Solutions financial advisers, told Zweig.

It's probably no accident that Vanguard is one of the first to offer low-cost financial advice. Its founder John Bogle has been railing against lofty investment fees for years.

"Don't let the miracle of long-term compounding of returns be overwhelmed by the tyranny of long-term compounding of costs," he said, according to Forbes.

Bogle wrote recently in the Financial Analysts Journal that an index fund would return 6.6 percent a year to its investors on average over a 40-year period, compared with 3.9 percent for an actively managed fund.

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In the pre-Internet days, you often had to pay your financial adviser a commission of more than 2 percent for a stock trade, and even now, you still must often give the adviser an annual fee equal to 1 to 2 percent of your assets.
Zweig, financial advisory, fees, Wall Street Journal
288
2014-33-21
Sunday, 21 September 2014 06:33 PM
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