Truths Financial Pros Won’t Tell You

The Securities and Exchange Commission did investors a favor in 2011 when it made financial advisers explain their compensation in plain English instead of industry jargon. Now when you request Form ADV Part 2, you can more easily see whether an adviser gets commissions from the investments he sells, charges a flat fee or a percentage, or is paid another way. The form also mentions disciplinary actions, conflicts of interest, and other background information. But Form ADV Part 2 doesn’t tell the whole story. Advisers won’t necessarily volunteer everything about the scope of the services they provide or all that you’ll pay to work with them. Those sins of omission—some inadvertent and some intentional—can cost you. Here’s what might be left unsaid. I’m more expensive than you think Fee-only planners, the kind we generally recommend, often charge an investment-management fee equal to a percentage of your assets. Annual fees for assets of $1 million or less can range from 0.7 percent to more than 2 percent, with 1 percent being average. But we recommend that you ask. Even a seemingly small difference in that fee—say, 1.5 percent a year instead of 1 percent—can cost you substantially.
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