Beginner Investors | Freeman Capital

The top 3 hidden costs for investing in

stocks and mutual funds for beginners.

Financial advisors, financial planners and investment platforms - Which one is just trying to sell you stuff?

This is the cold hard truth about some financial advisors – some are taking your money by accepting commissions, trailer fees and payments from product companies for a sales bonus. We’ve compiled some data that most people don’t know in an effort to help you identify these crooks. 

How do they get paid?

The Trailer Fee

Mutual funds typically pay financial advisors ongoing trailer fees. These fees range from 0.25 to 1% per year and are designed to motivate financial advisors to recommend that their clients invest in a particular mutual fund. Basically, some of these financial advisors are salespeople especially when you look at load fees. 

Percentage of Load Fees

Mutual funds typically charge investors front-and back-end fees. Every time an investor purchases shares of a mutual fund, you are charged an upfront percentage of the transaction, which is called a front-end load. A financial advisor receives a small share of this front-end load, and the same applies to the back-end load. Double dippin’ on your hard earned money. I don’t know about you but I don’t like double dipping in my salsa or my investments. 

Advisors driven by Fees

These fees generally average somewhere between 1-2% of the total value of the investments being managed. Now it doesn’t mean that these financial advisors can’t offer you a mutual fund or an investment that can charge you loads and trailer fees. They might say that the real cost is not hidden but read on to hear what Americans are saying. 

The cost straight from the mouth of your fellow Americans.

The amount of fees really varies for most Americans. A recent survey noted 90 percent of participants said that they are paying no more than $3,000. Compare that with the fact that some people have less than $1,000 to invest in their future, it’s no wonder some Americans don’t take the time to invest. Another real problem is that most Americans can’t tell you what kind of financial services a professional is offering them. 

Around 33% Guessed Right

In that same survey less than one third of investors correctly mentioned that stockbrokers buy and sell investment products on behalf of customers. What matters is the different types of financial advisors out there – those who want to make a quick commission from your investments and those who have your best interests in mind – always. You can start accurately identifying them by researching the regulatory laws that govern the roles of these different advisors.

What really matters & the real truth.

Financial planners and stockbrokers may both work in the finance market, but they perform two different roles. 

  • Stockbrokers are business professionals who focus on the sale and purchase of financial stocks.
  • Financial planners help people understand their financial situations and the options available to them.

Are you dealing with a salesman or one that is bound by a regulatory and ethical obligation to help you? Knowledge is power and you can empower yourself. 

The Real Difference

A stockbroker and a fully registered advisor are very different.  The word you need to know that describes their fundamental difference is “fiduciary.” A fiduciary is a professional who manages money for another, called the “beneficiary.” 

U.S. law places a positive obligation on any fiduciary to put the interest of its beneficiary first.

Why You Need a Financial Advisor in Your Life

  1. You get someone who continuously monitors your account
  2. You can trust someone to choose the lowest-cost products
  3. You can count on full transparency on payments and fees 
  4. They avoid taking a higher compensation that will not benefit you
  5. They take into account your personal financial situation, goals, and retirement plans before recommending investments

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