Fee Comparison

Fee-Only vs Fee-Based vs Commission

There are 3 types of financial advisers.  Fee-only, commission-only, and lastly fee-based which is a hybrid of the first two.  Composed Financial is a fee-only adviser.  All of the other firms listed below are fee-based, and have inherently more conflicts of interest as they receive a portion of their income from commissions for selling products.  Click here to see the advantages of fee-only advisers.

Fee Comparison

Composed Financial
Industry Average

Other Firms (in order from highest to lowest fees)

Lincoln Financial
Edward Jones
Merrill Lynch
JPMorgan
Ameriprise
TD Ameritrade
Wells Fargo
Morgan Stanley
Charles Schwab
UBS
E*TRADE
Fidelity
Scottrade
USAA

Composed Financial

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $273k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $3,091k (grey line on the graph).  That means your total opportunity loss due to fees is $715k.

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Industry Average2,3

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $580k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,394k (grey line on the graph).  That means your total opportunity loss due to fees is $1,411k.

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Lincoln Financial Separately Managed Account Balanced Strategy4

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $697k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,001k (grey line on the graph).  That means your total opportunity loss due to fees is $1,805k.

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Edward Jones Managed Account Balanced Strategy5

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $657k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,147k (grey line on the graph).  That means your total opportunity loss due to fees is $1,660k.

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 Merrill Lynch1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $660k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,173k (grey line on the graph).  That means your total opportunity loss due to fees is $1,633k.

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JPMorgan6

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $605k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,209k (grey line on the graph).  That means your total opportunity loss due to fees is $1,597k.

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Ameriprise1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $612k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,308k (grey line on the graph).  That means your total opportunity loss due to fees is $1,499k.

AmeripriseTable

 

 

 

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TD Ameritrade1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $605k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,327k (grey line on the graph).  That means your total opportunity loss due to fees is $1,479k.

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 Wells Fargo1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $585k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph). Instead, the fees cause your ending balance to be $2,381k (grey line on the graph).  That means your total opportunity loss due to fees is $1,425k.

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Morgan Stanley1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $577k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,401k (grey line on the graph).  That means your total opportunity loss due to fees is $1,405k.

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Charles Schwab1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $538k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,506k (grey line on the graph).  That means your total opportunity loss due to fees is $1,300k.

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UBS1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $530k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,528k (grey line on the graph).  That means your total opportunity loss due to fees is $1,278k.

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E*TRADE1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $519k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,557k (grey line on the graph).  That means your total opportunity loss due to fees is $1,250k.

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Fidelity1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $505k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,593k (grey line on the graph).  That means your total opportunity loss due to fees is $1,213k.

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Scottrade1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $455k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,721k (grey line on the graph).  That means your total opportunity loss due to fees is $1,085k.

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 USAA1

Assumes a $500k starting balance invested for 30 years earning a 7% annualized return before any fees.  The total fees paid over 30 years amount to $418k (represented by the red line in the graph).  Those fees represent an opportunity cost.  If you incurred no fees, your total potential portfolio could have earned the full 7% annualized return and ended at $3,806k after 30 years (blue line on the graph).  Instead, the fees cause your ending balance to be $2,815k (grey line on the graph).  That means your total opportunity loss due to fees is $991k.
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Sources

1.  Advisory fee and expense ratio fee percentage data by:

Personal Capital.  Financial Savings Report:  The Real Cost of Fees.  https://www.personalcapital.com/assets/whitepapers/PC_Fees_WhitePaper.pdf.  (visited July 7, 2016).

2.  Industry Average advisory fee data by:

Pricemetrix. The State of Retail Wealth Management, 5th Annual Report. http://www.pricemetrix.com/cms/wp-content/uploads/State-of-Retail-2015-05.pdf.  (visited July 7, 2016).

3.  Industry Average expense ratio data by:

Morningstar. 2015 Fee Study: Investors Are Driving Expense Ratios Down. https://news.morningstar.com/pdfs/2015_fee_study.pdf.  (visited July 7, 2016).

4.  Lincoln Financial Separately Managed Balanced Strategy data by:

Investment Adviser Public Disclosure (IAPD).  Lincoln Managed Assets Program (“LMAP”) Wrap Fee Brochure.http://www.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=378693.  (visited July 19, 2016).

5.  Edwards Jones Managed Account Balanced Strategy data by:

Edward Jones.  Edward Jones Managed Account Program Brochurehttps://www.edwardjones.com/images/MAP-brochure.pdf.  (visited July 19, 2016).

6. JPMorgan expense ratio calculated as the average gross expense ratio for the top 5 funds in terms of net assets in the JP Morgan family of funds. JPMorgan advisory fee data by:

JPMorgan.  JPMorgan Securities LLC – Interim Amendment of Form AV, Part 2A Appendix 1 – Wrap Fee Program Brochures.
https://www.chase.com/content/dam/chasecom/en/investments/documents/jpmcap_adv2a.pdf.  (visited July 19, 2016).