Detailed Fee Disclosure
Our open and thorough discussion of fees.
Controlling your investment expenses is a critical component of investment management that should not be overlooked. Our efforts to utilize low-expense vehicles and our overall sensitivity to the fees our clients pay are a result of one overriding goal we have as an organization: Allowing our clients to capture and retain for themselves more of the market’s returns.
It is our policy to be an open book regarding the fees our clients pay us AND the fees they pay other service providers. Fees are relevant and one of the determining factors of how quickly your assets will grow. You have our commitment to do what we can to keep the fees you pay to a minimum. You deserve nothing less.
The following are typical fee categories that investors are subject to. Also noted is what our clients pay in each category.
Investment Advisory Fee (management fee):
This fee compensates the investment advisor for the initial and ongoing investment management and oversight of the account. Our firm also provides performance reporting and periodic client consultations as part of the overall investment management process.
The annual fee our clients pay for investment advisory services is .9% of assets under management. For example, a $20,000 IRA Rollover would be charged $45 dollars per quarter ($20,000 x .009 / 4). A tiered fee schedule is offered for large accounts in excess of $500,000.
While this fee is lower than the majority of our competition, we feel it compensates us fairly and is in line with our goal of allowing our clients to keep more of their returns.
Custodian Fees:
The custodian of your account safeguards the assets, collects dividend and interest payments on your behalf, and performs recordkeeping and tax reporting functions. The custodian, in most cases, will be the firm you send your deposits to and the company that prepares and sends your monthly or quarterly investment statements. Your investment advisor may or may not work for the company that provides custody services for your account. Custodians charge fees in a number of different ways.
The two primary fees that clients will pay custodians are asset based fees and transaction fees. Asset based fees are charged in a manner similar to investment advisory fees, based on a percentage of asset under management. Transaction fees are charged when a security is purchased or sold in your account.
Our clients’ assets are held at a low cost custodian and are not subject to an asset based custodian charge. Transaction fees are extremely low at $7 per trade for ETFs and $17 for some mutual funds. Many mutual funds are offered as NTF or on a no transaction fee basis.
Again, keeping custody fees low is in line with our goal of allowing clients to keep more of the returns their investments generate. We could work with higher cost providers that may offer more bells and whistles for their advisor relationships, but that would not be consistent with what we are trying to accomplish for our clients.
Mutual Fund Expense Ratios:
Mutual Funds expense ratios are somewhat of a mystery to many investors. These expenses range from below .1% for some index ETFs and go up to over 2% for some actively managed mutual funds. This is a significant difference in cost that can result in drastically different investment returns. These fees are not painful for investors to pay, because they are wrapped into the daily pricing of the funds and are virtually invisible. In other words, an investor never writes a check for these fees nor is there a line item on a statement showing these fees were deducted. The fees generated from the expense ratio of mutual funds are used to compensate many people: money managers, investment advisors, administrative staff, distributors, custodians, and others. In many cases, a mutual fund company will offer several share classes for the same fund with the primary difference between the share classes being the size of the expense ratio. The fund company is required to disclose its expense ratio in its prospectus, so read it carefully.
The foundation of our clients’ investment portfolios is primarily Vanguard funds. Over the years, Vanguard has positioned itself as the ultra low cost fund company in terms of mutual fund internal expenses. One of the reasons Vanguard’s performance is so difficult for other providers to match is because their internal fund expenses are much lower than the industry average. An investor that owns an XYZ company mutual fund that carries a 1.3% expense ratio has their work cut out for them if they are comparing their performance to a Vanguard portfolio that has average expense ratios in the .2% range. The XYZ company portfolio would need to perform over a full percentage point higher than the Vanguard portfolio just to attempt to justify the higher fees.
Some industry sales people get paid by these expense ratios and clients aren’t always aware of this compensation, because the fees are somewhat invisible. Buying funds with high expense ratios is rarely in the clients’ best interest. It is, however, oftentimes in the advisor’s best interest. Placing our clients’ funds in such low cost vehicles, is again, consistent with our goal of allowing our clients to keep a higher portion of the market returns. We are never compensated by the fund companies whose funds we purchase in our managed accounts.
Loads:
Loads are sales charges paid by an investor that buys shares in a load mutual fund or annuity product. There are a number of different types of loads, but two of the most common are front-end loads (sales charge paid at purchase) and back-end load (sales charge paid at sale).
Our firm never invests in loaded products. Our clients do not pay these fees.
Commissions:
Northwest Advisory Group, Inc. does not sell any products. We are not a commission compensated firm.
Surrender Fees:
Our clients are never subject to surrender charges. If a client chooses to remove our firm from providing investment management services they can do so without an exit fee. Some mutual funds charge early withdrawal penalties, but those fees stay at the fund company and are not shared with our firm. These mutual fund deferred sales charges almost never come into play except in the rare occasion that a major financial event in one’s life happens almost immediately after their investment account is funded.
In summary, we charge an extremely reasonable asset based fee for continuous investment management services. Not being tied to any particular parent company and not receiving commission incentives from the various mutual fund companies removes all potential conflicts of interest when determining where to place your funds. In fact, it is a major goal of our firm to implement your investment portfolios in a manner that will minimize the overall fees you pay. It is our goal to minimize fees so that you capture and keep more of the market returns for yourself instead of passing those dollars along to us or other service providers.
Disclosure Statement:The contents of this website are for informational purposes only and are not a solicitation to either buy or sell securities. No new account will be accepted unless and until all local regulations have been satisfied. The material presented on this website is from sources believed to be reliable, but it's content is not guaranteed and may be subject to change at any time. Please read our privacy policy prior to leaving this site. Northwest Advisory Group, Inc. does not offer guaranteed rate programs. Investing in financial markets involve the risk of losing principal. Northwest Advisory Group, Inc. does not manage bank guarantee or FDIC accounts. All visitors to this website should note that past performance is not necessarily indicative of future results.