Janine Bolon: Hi, this is Janine Bolon. Thank you for joining us again for another episode of the 3-minute Money Tip. And you are lucky today because today, I have my guest, Mitch Grant. He is a Financial Planner at Granite Capital Management in Columbus, Ohio, offering comprehensive financial planning services through Lincoln Financial Advisors Corporation, a broker-dealer member SIPCA, and a registered investment Advisor.
Now, Granite Capital Management is not an affiliate of Lincoln Financial Advisors. Opinions expressed are those of Mitch Grant are not necessarily those of Lincoln Financial Advisors Corporation. Lincoln Financial Advisors and its representatives do not provide legal or tax advice. The content of this podcast is for informational purposes only. It is not intended to be personalized or specific in nature or to be relied upon for your personal situation in any circumstance. We encourage you to consult a legal or Tax Advisor, prior to making a tax-related investment or insurance decisions.
I just have to let you know a little bit about Mitch Grant. He and I have been buddies for years and years and years. I know him when I lived in Columbus, Ohio, and because he is a certified financial planner, we have to play nice with the compliance department and when we are introducing him, but just know he’s a wonderful guy. Just give him a call visit his website. He’ll be glad to help you with your finances. I refer people to them all the time. So, make sure you’ve got three minutes and kind of talk to us about the things that are going on today with fees.
Mitch: Yeah. Well, thank you Janine without the expressed written consent of the commissioner. That was a mouthful but I appreciate that your elbow on the introduction and there are a lot of expenses involved in investing money and has been that way for many years. It’s got the eye of regulators and the consumer alike. So, I want to talk about what an average investor should expect to pay to obtain advice to a fee-based asset management account and that’s different than a commission-based account where you can often pay a 5-6% front load, maybe a 4% front commission and then a small fee as you go along. More and more investment advice is found on investment platforms where there’s no upfront commission or rear-end penalty. There is basically an advisory fee and some other components as well, too.
There are three major components of expenses incurred by investors. The first is a platform charge. The charge pays for the cost of technology and administration. Second expense ratios found an exchange-traded, mutual funds, and also regular mutual funds. These expenses are paid for the design and management of the funds you invest in. The third is advisory fees and these fees for your advisory firm or selected investments, monitor investments, rebalance the portfolio. These fees can also pay for personal financial planning reports. Platform charges usually range from 0.15 to 0.5%. So, you know, less than a half percentage point, expense ratios, the mutual funds, exchange-traded funds, they vary more widely usually between 0.1 and 1.0%. That is a tenth of a percent to 1% or a little more.
Advisory fees are often the largest expenses and are often negotiable. They can range from half a percentage point to well, over one and a half percent. I’ve seen several large accounts, a competitor broker-dealers with fees and expenses totaling over two and a half percent. Now, the cost of this size particularly for larger accounts is not necessary. Do it yourself brokerage accounts with no commissions. Usually, they have expenses of two and a half a percentage point one percent. This low-cost approach works for many. However, diversification can be limited. Securities may be too concentrated in the portfolio. Maybe it’s you who can balance it not by an advisor. Now, I believe advice is important and worth the expense of the underlying investments are well researched, competitive rebalanced with a client reviewed at least annually.
Fee-based asset management of caliper and an average investor can be effectively built for a cost of less than 2% of assets under management using exchange-traded funds and institutional-priced mutual funds. So, I think those are the kinds of questions you should ask your advisor. When you’re looking at fee-based asset management, ask about these fees and see if they are competitive between one and a half and two percent. I think that’s quite competitive if you’re getting good advice.
Janine: And thank you so much, Mitch. And for everyone out there that may have been like, “What did he just talk about?” Believe it or not, I was that kind of person. When I first met Mitch, I was reading books on how to find an appropriate financial advisor, or how to find a financial planner and those sorts of things. And so, what I want to share with you is just go to LinkedIn and you will find Mitch Grant there and then you can go to his website which is granitecapitaloh.com. and just get to know him. He’s got a lot of free stuff that you can look at, you can see his team’s and what’s going on. And if you are just like, “All I heard were percentage numbers and I have no idea what he’s talking about.” Believe it or not, give him a call. He will be glad to let you know what you need to know about what he’s talking about. This is his job. Alright, this is Janine Bowling with the 3-minute Money Tip. Thank you so much for being with us today.