Investors Don’t Bite the Hand that Fees Them

However, many with mutual fund wrap accounts are not even aware of the fees they are paying.

Perception and Understanding of Fees surveyed 501 affluent investors (more than $500,000 in investable assets) in order to capture their sentiment about fees. The study concludes that advisers should present fees as clearly as possible and be prepared to discuss fees in detail with investors, who are all interested—particularly the younger and wealthier clients.

Overall, most investors surveyed did not think fees charged for investment services were too high. The breakdown of that sentiment is as follows: 27% “strongly disagree’ that fees are too high, 20% “disagree,’ and 22% are “neutral.’

Investors with an adviser were less likely than those without an adviser to think their fees are too high (10% verse 19%). The portion of investors surveyed who have a primary financial adviser of some sort totaled 68%.

Fees First

Sixty-six percent of investors surveyed thought fees were important, and this number was even stronger in the under 55 crowd (71%). Additionally, affluent investors with assets of $1 million or more place a greater level of importance on fees than do those with fewer assets.

Fees are not necessarily less important than returns to investors: Only half of those surveyed “strongly disagree’ that fees are more important than returns, the report says. Spectrem suggests this is because investors are willing to accept higher than average fees if the performance of the underlying investments warrants the price.

Fees do not seem to be a basis for comparison shopping, Spectrem says. Interestingly, investors without an adviser are more likely to comparison shop than those with an adviser (29% verse 18%).

Mutual Understanding

Only 28% of those surveyed invest in a mutual fund wrap accounts, although most of the investors surveyed own mutual funds (78%).

Almost half (46%) of investors don’t know the percentage they are paying for their mutual fund wrap account, and 32% are paying between 1% and 1.99%

As far as regular mutual fund fees, more than half of the mutual fund owners claimed to be familiar with different share classes and 81% claimed to understand investment management fees, the report says.

The report can be ordered from www.spectrem.com.