Investment Question

[sea-tax]

Ask him please because I am in a panic over this mutual fund thingy, they are liars and cheats. I mean they actually want to be paid for their services the audacity.......

I figure burying it in the yard at least I wont' pay any fees, inflation might be a slight problem but I won't have lost my principal to those fees.

[JohnH]

As you well know, it isn't the fees - it's the chicanery involved.

Mutual fund companies go to great lengths to hide the fees and confuse the customer about what they are really paying. I'm thinking that isn't an accident. And John Bogle is the one who taught me that fact.

Anyone deserves to get paid for their efforts, but their customer has an equal right to know exactly what they are paying for those efforts. That isn't happening with most of the Mutual Fund industry - the confusion is clearly designed into the system.

[sea-tax]

I know those shysters are so clever they bury them in the Prospectus,
Take for example on Page 2 of the Prospectus for the Short-term bond Fund of America, they hide them so well by putting on the top of the page " Fees and Expenses OF the Fund"

I mean do they really expect for us to look in the prospectus and actually read it?

[JohnH]

Disclosure. Interesting word.

So if the fees can be described in the prospectus, especially if they're so easy to understand, why can't they be computed and clearly presented on the quarterly statement?

After all, my fee schedule is disclosed in my engagement letter, but as a matter of good business practice I still render an invoice when I expect money to be transferred from my client's bank account into mine. That gives my clients an opportunity to clearly see what they are paying and to make an informed judgement about whether they are getting their money's worth from me.

[Nashville]

Two of our Best Folks

...are going at it like Banty Roosters. I must have started this because I didn't understand my mutual fund statement. That should tell you something right there. And my experience with 401k plans has revealed several different tiers of fees, only some of which are disclosed.

Having said that, I don't think anyone expects a service for nothing. Imagine being able to call your broker to buy securities, and he sits there to service you and do all this administrative work for free because we gripe about the fees. He wouldn't be there very long.

However, like all products and services, the buyer should compare and beware. And the performance should be measured by consistent yardsticks. And I believe legislation requires this at the mutual fund level, but not at the reseller level. And it is also law that the published rates of return are NET of the fees, whether the reader understands them or not. I do believe they are properly presented, but not every reader understands them.

I can't say the same for banks and insurance companies. And if any industry presents itself as a bastion of truth-in-disclosure, I certainly wouldn't compare to the banks or insurance companies. Remember, insurance companies (and not brokers) are the primary custodians of the undisclosed fees I spoke of in a previous post.

Putting money in a bedpost or burying it in Mason jars is not the answer for an investment plan. Paying a competent and straightforward broker selling financial products IS the answer. But not one selling buckets with so many leaks you never make any money.

[JSLATER]

Paying a competent and straightforward broker selling financial products IS the answer. But not one selling buckets with so many leaks you never make any money."

Yes, that is the answer, but try to find one that is consistent. A client of mine had such good luck with his broker for five years and then the broker went weird. The 1099 B was awash with equities the client had no idea what they were. Especially, when the K-1's from the ETF's started showing up. The client had no idea what these were for and didn't even understand what the K-1's were telling him. He called me and ask, "What's a straddle and what is an Ultra short fund for financials", and on and on. People today, even with the Internet look at the percentage, return or performance over the years, they do not do any research. Joe is doing a good job" so why change. Try to get a client to look at monthly or even quarterly statements and call their advisor is next to impossible. They wait until tax time and when you give them the results, you are the one who gets to hear "it." Then they want you do "fix" the problem.

I guess this is venting, but I had too many clients that were "screwed" by advisors and brokers who had no idea what to do in the current economy and told me I should have warned them?!?!

90% of my clients are retired and consider themselves investors, even though they all have advisors. Only two have their advisor work with me and those were the only ones who did not take a big bath this year.