This post may a bit nit-picky, but it shows how even when saving money by switching from actively managed to passive funds and ETFs, retail investors still pay too much in fees due to poor advice from brokers and wealth managers. About a decade ago when I lived in Switzerland, I was invited by a now defunct private bank to meet a client adviser who wanted to convince me to become a client of theirs. His main sales pitch was that they just launched a portfolio mandate option that consisted only of ETFs and index funds. They said that the fee for the mandate is a mere 0.7% per year. Ok, I said, can you show me the funds you invest in? The list of ETFs were almost entirely in-house ETFs run by the company’s own portfolio management team. Fair enough. So I asked if the fees of the ETFs are included in the 0.7% fee for the mandate? It turns out they weren’t. The 0.7% fee was just for advisory and regular rebalancing of the funds. The funds themselves charged an extra 0.7% in fees.
Retail investors pay too much for ETFs
Retail investors pay too much for ETFs
Retail investors pay too much for ETFs
This post may a bit nit-picky, but it shows how even when saving money by switching from actively managed to passive funds and ETFs, retail investors still pay too much in fees due to poor advice from brokers and wealth managers. About a decade ago when I lived in Switzerland, I was invited by a now defunct private bank to meet a client adviser who wanted to convince me to become a client of theirs. His main sales pitch was that they just launched a portfolio mandate option that consisted only of ETFs and index funds. They said that the fee for the mandate is a mere 0.7% per year. Ok, I said, can you show me the funds you invest in? The list of ETFs were almost entirely in-house ETFs run by the company’s own portfolio management team. Fair enough. So I asked if the fees of the ETFs are included in the 0.7% fee for the mandate? It turns out they weren’t. The 0.7% fee was just for advisory and regular rebalancing of the funds. The funds themselves charged an extra 0.7% in fees.