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Fee Clarity in Retirement · Money In Motion with Klaas Financial

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  Speaker 1: And our phone lines. They are open for you right now.
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  Speaker 1: If you'd like to join our retirement planning professionals from
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  Speaker 1: Class Financial, we have CJ. Closs and Malia Quavis the
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  Speaker 1: Gangs all year this week for you. The telephone number
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  Speaker 1: six oh eight three two one thirteen ten. That's six
• 0:14
  Speaker 1: oh eight three two one thirteen ten gets you on
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  Speaker 1: the air with CJN Malia don't forget. You can learn
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  Speaker 1: more about Class Financial on their website Cossfinancial dot com.
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  Speaker 1: That's colss k l Aasfinancial dot com. Great website and
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  Speaker 1: resource to learn more about costs their separate divisions. Also,
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  Speaker 1: you can listen back and subscribe to the podcast on
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  Speaker 1: the website and an all the great feature is down
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  Speaker 1: you can sign up for the weekly Market Pulse newsletter
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  Speaker 1: that available to you at Cossfinancial dot com. Speaking of
• 0:43
  Speaker 1: other things available to you, the telephone number for Coss
• 0:45
  Speaker 1: Financial six oh eight four four two five six three seven,
• 0:49
  Speaker 1: No charge for that. Initially get to know you appointment
• 0:51
  Speaker 1: tech Loss Financial, it will be complementary to you again
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  Speaker 1: their telephone number six oh eight four four two five
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  Speaker 1: six three seven and our phone lines here at the
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  Speaker 1: station are open for you as well if you've got
• 1:00
  Speaker 1: questions this morning with any further ado Joining us this
• 1:02
  Speaker 1: morning our CJ Closs and Malia Quavis.
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  Speaker 2: CJ.
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  Speaker 1: How you doing this week.
• 1:06
  Speaker 2: I'm doing great. Happy Thursday, Sean.
• 1:09
  Speaker 1: Great to talk to these great soccer weather right now,
• 1:11
  Speaker 1: by the.
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  Speaker 2: Way, it sure is. My kids are playing plenty of it.
• 1:13
  Speaker 1: Yeah, it's a good time to get around and get
• 1:16
  Speaker 1: out and nice cool weather. Malia, good to have you back.
• 1:19
  Speaker 1: Did I hope you did something fun or was it
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  Speaker 1: a working a little bit of a.
• 1:23
  Speaker 3: Working thing, but good, good, Good to be back with
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  Speaker 3: you and enjoying these last days of a really nice weather.
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  Speaker 2: It's been happy to be here.
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  Speaker 1: It's been a great season. And yeah, we've got some
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  Speaker 1: great stuff ahead as well. On the program, we're gonna
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  Speaker 1: be talking about things like four oh one k's and investing,
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  Speaker 1: whether on your own or with a finance pressure. We'll
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  Speaker 1: get some details on that and understanding fees and costs
• 1:46
  Speaker 1: with those type of things. Is they always say there's
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  Speaker 1: no free lunch. We'll talk a little bit about the
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  Speaker 1: importance of understanding those fees and it can get it
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  Speaker 1: gets very very interesting. So you're definitely gonna want to
• 1:57
  Speaker 1: pay attention closely to this week's program. Another reason to
• 2:00
  Speaker 1: pay attention to this week's program is the Class Quiz
• 2:02
  Speaker 1: Question week. This week we'll have a chance to win
• 2:04
  Speaker 1: a fantastic prize from our friends at Class Financial at
• 2:07
  Speaker 1: twenty five dollars gift card food and Laughs gift card
• 2:10
  Speaker 1: at several restaurants in the area. So you got some
• 2:13
  Speaker 1: options with that gift card. Again, we'll tell you how
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  Speaker 1: you can win a little bit later on the program,
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  Speaker 1: little tipto if you listen to the show closely most
• 2:20
  Speaker 1: of the time every time the question and answer come
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  Speaker 1: up during the program, So pay close attention for a
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  Speaker 1: chance to win that twenty five dollars food in Laughs
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  Speaker 1: gift card. Before we get rolling on this week's conversation,
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  Speaker 1: let's actually take a look back at last week's program
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  Speaker 1: and get the Class Quiz question the week question and
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  Speaker 1: answer there as well. Malia.
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  Speaker 3: Yeah, so last week we had a timely show because
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  Speaker 3: we celebrated national four to oh one K Day and
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  Speaker 3: we had our retirement specialist Director of Retirement Plans actually
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  Speaker 3: with us, Forrest Ross, and what we covered on that
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  Speaker 3: show was really for the small business owners perhaps who
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  Speaker 3: are thinking about putting some retirement plans in place for
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  Speaker 3: their own employees, or if you're one of those employees,
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  Speaker 3: how you should be taking advantage of putting away for
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  Speaker 3: your future. So our question was aligned with that, it
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  Speaker 3: was a truer false question. As of December twenty twenty three,
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  Speaker 3: assets held in four oh one K plans across the
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  Speaker 3: US held more than seven trillion dollars in retirement assets.
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  Speaker 3: So congratulations to our winner last week that was Ellen
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  Speaker 3: of Madison. She correctly answered true. They actually held over
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  Speaker 3: seven point four trillion dollars in those four oh one
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  Speaker 3: K plans. So if you're not putting your dollars in
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  Speaker 3: every month, you need to seriously look at accelerating that
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  Speaker 3: so you can be part of that big number.
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  Speaker 1: As a really in a really good program as always,
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  Speaker 1: and a lot of great information. So if you want
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  Speaker 1: to listen back to do't forget to head on over
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  Speaker 1: to Clossfinancial dot com. That's Coss Klaasfinancial dot com. So
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  Speaker 1: I know, obviously you guys help folks when it comes
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  Speaker 1: to retirement planning. You're doing a day in and day out,
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  Speaker 1: and I know it's important to kind of understand associated
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  Speaker 1: fees that can show up when investing. It's whether you're
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  Speaker 1: doing it on your own or your four oh one
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  Speaker 1: ks or with a finance professional. Understanding that stuff is
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  Speaker 1: really important, isn't it CJ.
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  Speaker 2: Yeah it is. This is an important topic for all
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  Speaker 2: investors to be aware of. However, as we begin this topic,
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  Speaker 2: I do just want to kind of cover it with
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  Speaker 2: the element of fees aren't necessarily bad. Right when you
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  Speaker 2: go to buy a cup of coffee at the local
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  Speaker 2: gas station and it costs whatever, fifty cents actually nowadays
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  Speaker 2: it costs like a buck twenty five. But when you
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  Speaker 2: do that, there's a fee associated. And I promise you
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  Speaker 2: the coffee that they bought and brewed doesn't cost them
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  Speaker 2: a buck twenty five. It costs them something less, And
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  Speaker 2: so you're paying them a fee. What are you paying
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  Speaker 2: them a fee for work? Clearly not good coffee because
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  Speaker 2: typically it's not great, but you're paying them for the
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  Speaker 2: convenience of not having to make it yourself. So in
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  Speaker 2: the investing world, to say that there are fees is
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  Speaker 2: like yeah, no da, right, no da. Somebody has to
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  Speaker 2: bring a mutual fund or an ETF or provide a
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  Speaker 2: custodial really relationship or provide security or authenticity of securities.
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  Speaker 2: There's a lot that goes into making something purchasable and
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  Speaker 2: tradable on an exchange for you, And so no doubt
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  Speaker 2: there's a cost. So costs aren't bad. That's what I
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  Speaker 2: want to start with. Costs are not bad. The question
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  Speaker 2: is how much is the cost that you are paying?
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  Speaker 2: And what is the cost for paying for somebody just
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  Speaker 2: to represent a product to me? Am I paying somebody
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  Speaker 2: for ongoing advice or guidance? Or am I paying a
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  Speaker 2: fee so that the mutual fund manager and their team
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  Speaker 2: can pay their salaries. It is just important to know
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  Speaker 2: what you are paying, how you are paying it, and
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  Speaker 2: what the incentives are for the people that you're paying. So,
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  Speaker 2: as I said, keep in mind that with any associated
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  Speaker 2: service or costs, there are going to be different different
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  Speaker 2: types of fees. Our goal is to help minimize the
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  Speaker 2: confusion and hopefully spell out some of the basics. So
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  Speaker 2: we feel that it's important that you understand before you
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  Speaker 2: invest where these fees are coming from. So here are
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  Speaker 2: some of those different types of fees to be aware of.
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  Speaker 2: And as we go down this path, Malia is gonna
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  Speaker 2: line this out more in a little bit. But advisors
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  Speaker 2: get paid in different ways, okay, so be aware of
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  Speaker 2: that advisors get paid in different ways. Some of them
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  Speaker 2: are commissioned fee. Mali will talk all about this in
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  Speaker 2: a moment, But often the way the advisor gets paid
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  Speaker 2: is what drives the outcome of the different fees that
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  Speaker 2: you are paying. Okay, so let's dive in. What are
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  Speaker 2: some fees with like your irais and four to one case. Well,
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  Speaker 2: a term that you should understand is the term load.
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  Speaker 2: So for a commission based advisor, they will often sell
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  Speaker 2: loaded mutual funds. A load is a sales charge or
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  Speaker 2: a commission charged to an investor when buying or redeeming
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  Speaker 2: shares in a mutual fund. They're determined by the mutual
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  Speaker 2: fund company and charged by mutual fund intermediaries in mutual
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  Speaker 2: fund transactions. Common types of sales charge include front end
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  Speaker 2: loads for a share mutual funds, back end loads for
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  Speaker 2: C share mutual funds, and so the idea of this
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  Speaker 2: would be if you put money into a mutual fund
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  Speaker 2: and you find out that you know you put in
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  Speaker 2: I don't know, say ten thousand dollars, and when you
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  Speaker 2: look at your statement, only nine thousand, five hundred dollars
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  Speaker 2: actually goes into that fund. That would be a front
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  Speaker 2: and a share load that you paid. So just something
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  Speaker 2: to be aware of.
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  Speaker 1: Talking this morning with CJ Colss and Molia Quavis. They
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  Speaker 1: are our retirement playing professionals from COSS Financial. The website
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  Speaker 1: cossfinancial dot com. That's COSS k l Aasfinancial dot com.
• 7:30
  Speaker 1: They're telephone number six oh eight four four two five
• 7:33
  Speaker 1: six three seven. No charge for the National'll get to
• 7:35
  Speaker 1: know your appointment at costs financial. It will be complementary
• 7:37
  Speaker 1: to you. They're number six oh eight four four two
• 7:39
  Speaker 1: five six three seven telephone number if you'd like to
• 7:42
  Speaker 1: get on the air this morning. Loved to have you
• 7:43
  Speaker 1: join us. Six oh eight three two one thirteen ten.
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  Speaker 1: That's six oh eight three two one thirteen ten. So
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  Speaker 1: CJ tell us more about these about these loads.
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  Speaker 2: Yeah, yeah, So there's there's the front end load we
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  Speaker 2: talked about. That's an a share mutual fund. Often and
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  Speaker 2: again these are sold by commissioned advisors. They are known
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  Speaker 2: as registered representative. They are registered to represent a company
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  Speaker 2: who is selling a product out in the public. They
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  Speaker 2: do not represent you. Now that's not again, there's plenty
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  Speaker 2: of salespeople. Right, you go to buy a car, they
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  Speaker 2: represent the dealership, not you, right, So this is not
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  Speaker 2: a bad thing, but it's just to understand what is
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  Speaker 2: the incentive for the registered representative And the answer is
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  Speaker 2: to sell stuff. That's their incentive, and they're not representing you,
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  Speaker 2: They're representing the company that they are selling the product of.
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  Speaker 2: So therefore the way they get paid is through a commission.
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  Speaker 2: Again not dissimilar from going to an auto dealership, but
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  Speaker 2: an a share mutual one has a front end load.
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  Speaker 2: Those front end loads can range from as high as
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  Speaker 2: eight or nine percent down to one percent. Now typically
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  Speaker 2: mutual funds will only go up to about five percent
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  Speaker 2: on a front end load, but again it just depends
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  Speaker 2: on the type of product that you are buying. There's
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  Speaker 2: also back end loads, also known as contingent deferred sales charges.
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  Speaker 2: These CDs c's as we call them, because you know,
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  Speaker 2: our industry loves all the acronyms. Cdscs can come on
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  Speaker 2: C shares if you don't hold them long enough, and
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  Speaker 2: they can also come on B shares, although B shares
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  Speaker 2: are becoming much less common in the industry nowadays. But
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  Speaker 2: those back end fees can be as high as five
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  Speaker 2: percent on a B share if you sell out of
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  Speaker 2: it too quickly, or in the case of a C share,
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  Speaker 2: if you sell it too quickly, it would be a
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  Speaker 2: one percent contingent to ferred sales charge. And then there
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  Speaker 2: are what are known as no load investments, so no
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  Speaker 2: load funds or ETFs. And typically since a financial professional
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  Speaker 2: isn't involved in the actual representation of the sale of
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  Speaker 2: that product, there is no commission, so there's no front
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  Speaker 2: end commission, back end commission, anything like that, so there's
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  Speaker 2: no load. However, they can still have what are called
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  Speaker 2: and Malia will talk more about this later internal expenses
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  Speaker 2: or even in some cases twelve B one fees. Now,
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  Speaker 2: these twelve B one fees can't exceed about point two
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  Speaker 2: five percent per year, but the idea of this is
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  Speaker 2: those internal charges pay for the ongoing issuance of that
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  Speaker 2: particular no load fund. Now, before Malia talks about these
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  Speaker 2: these categories of advisors, it is important to understand that
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  Speaker 2: typically fee based financial professionals work with no load investments
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  Speaker 2: because they are not registered to represent a company, they
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  Speaker 2: are actually representing you. So more to come on that
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  Speaker 2: in Malia section really.
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  Speaker 1: Important distinctions there as we talk with CJ. Coloss and
• 10:25
  Speaker 1: Malia Quavis. They are our retirement planning professionals from Claus Financial.
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  Speaker 1: The website class financial dot com that's coss k l
• 10:31
  Speaker 1: aas Financial dot com and their telephone number six oh
• 10:34
  Speaker 1: eight four four two five six three seven. No charge
• 10:38
  Speaker 1: for the initial gets to know You appointment at Colss Financial.
• 10:40
  Speaker 1: It will be complimentary to you again their number six
• 10:43
  Speaker 1: oh eight four four two five six three seven. Wellos
• 10:45
  Speaker 1: into our conversation with Cjenmalia and we'll find out for
• 10:48
  Speaker 1: Malia what type of fees you're likely to pay when
• 10:50
  Speaker 1: working with an advisor. We'll get the details next as
• 10:53
  Speaker 1: Money in Motion with Class Financial continues right here on
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  Speaker 1: thirteen ten. Wib E chatting this morning with our retirement
• 11:03
  Speaker 1: planning professionals from Class Financial, CJ. Closs and Malia Quavis.
• 11:07
  Speaker 1: You can learn more about Class Financial their website coss
• 11:10
  Speaker 1: financial dot com that's coss k l a a s
• 11:13
  Speaker 1: Financial dot com and their telephone number six O eight
• 11:16
  Speaker 1: four four two five six three seven. No charge for
• 11:19
  Speaker 1: the financial get to know your appointment at COSS Financial.
• 11:21
  Speaker 1: It will be complimentary to you again. The office number
• 11:24
  Speaker 1: six oh eight four four two five, six, three seven,
• 11:27
  Speaker 1: talking this week about about understanding charges and costs to
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  Speaker 1: two things when it comes to planning and financial planning,
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  Speaker 1: and of course we talked this week Malia, if you're
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  Speaker 1: using a financial advisor, what are some of the fees
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  Speaker 1: that folks are likely to see or should understand there.
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  Speaker 3: Yeah, this is really critical because at the end of
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  Speaker 3: the day, we all want to know what our fees
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  Speaker 3: are going toward.
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  Speaker 1: That's it.
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  Speaker 3: And I remember years ago having clients who had bank
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  Speaker 3: accounts and suddenly their banks were charging them fees on
• 12:00
  Speaker 3: every little thing, and some of that still continues today,
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  Speaker 3: and they would say to me, I feel like I'm
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  Speaker 3: being feed to death, and that's not a good feeling. Right.
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  Speaker 3: Understanding there's fees and what they mean is one thing,
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  Speaker 3: but to feel like, you know, they're just fees and
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  Speaker 3: I have no one understanding of what that translates into.
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  Speaker 3: So that's really what we're trying to do here today
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  Speaker 3: is provide that clarity. So, as CJ mentioned, with the
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  Speaker 3: commissionable funds, there's three basic ways that advisors get paid.
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  Speaker 3: So the first one would be commission only advisors paying
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  Speaker 3: through a load like we just explained, So I think
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  Speaker 3: that's that's clear. The second way is what's considered a
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  Speaker 3: fee only advisor. So in this situation, you're paying a
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  Speaker 3: specific fee for a service. It could be on an
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  Speaker 3: hourly basis, a project based, based plan, whatever it is.
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  Speaker 3: You're going to know when you sit down with the
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  Speaker 3: advisor what type of cost you're going to be paying
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  Speaker 3: and won't be a surprise. And then we have what's
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  Speaker 3: known as fee based advisors, So in this situation they
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  Speaker 3: may use a combination of methods. Your fee may show
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  Speaker 3: up as an assets under management fee, which is when
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  Speaker 3: your account is charged each year as a percentage of
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  Speaker 3: how much money is being managed for you. So an
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  Speaker 3: example of this could be that if you have a
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  Speaker 3: certain amount of assets under management with a financial advisor,
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  Speaker 3: you may have one percent or more or perhaps even
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  Speaker 3: less depending on the balance of those assets on a
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  Speaker 3: yearly basis. So essentially, the more your account makes, the
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  Speaker 3: higher dollar fee that comes out. The less you make
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  Speaker 3: in a given year, the lower the fee. So a
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  Speaker 3: case in point back in twenty twenty two, when the
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  Speaker 3: market dropped considerably, your fee would reduce automatically. With that
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  Speaker 3: in mind, now if you have a higher balance, obviously dollars.
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  Speaker 3: You see that balance go down, and that could be
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  Speaker 3: a significant reduction in your fee, and you know you
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  Speaker 3: would take note of that. But for clarity, how does
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  Speaker 3: cost financially get paid When we work with clients. We
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  Speaker 3: fall under the fee based or fee only advisory models
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  Speaker 3: as a registered investment advisor, so different ways we can
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  Speaker 3: work with folks, but we are not in the commission
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  Speaker 3: based portion of the industry for the most part at
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  Speaker 3: this point. Other fees to be aware of include expense ratios,
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  Speaker 3: which are fees that cover the annual fund operating expenses
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  Speaker 3: that CJ was mentioning. For example, you may see in
• 14:35
  Speaker 3: a prospectus if you read those things, or even a
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  Speaker 3: year end statement and expense ratio of one percent, which
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  Speaker 3: means that if you have invested one thousand dollars, for example,
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  Speaker 3: and your mutual fund, then your cost in that one
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  Speaker 3: fund is essentially ten dollars at the end of the year.
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  Speaker 3: So the fees that make up an expense ratio include
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  Speaker 3: management fees. So again those portfolio mana are getting paid
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  Speaker 3: distribution and services twelve B one fees. There's a lot
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  Speaker 3: that comes under that that essentially is paying for the
• 15:08
  Speaker 3: funds marketing costs, so how much it takes to promote
• 15:11
  Speaker 3: the funds. So you can imagine some of the bigger
• 15:14
  Speaker 3: funds out there, those fees are a little higher because
• 15:17
  Speaker 3: they are marketing across the United States and the world,
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  Speaker 3: and administrative fees and operating costs, so those would include
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  Speaker 3: salary salaries for managers, record keeping, and research. So you
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  Speaker 3: have to understand that some funds are more expense expensive
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  Speaker 3: to run than others, and that will impact how high
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  Speaker 3: or low the expense ratio is. So generally mutual funds
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  Speaker 3: that invest in large companies, those will have expense ratios
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  Speaker 3: under one percent. However, funds that focus on small companies
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  Speaker 3: or international stocks, they may have expense ratios that range
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  Speaker 3: up to one point two five percent. So it's important
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  Speaker 3: to understand what goes into a fee. And also a
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  Speaker 3: term we like to discuss quite a bit is understanding
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  Speaker 3: what is meant by the word fiduciary, because this is
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  Speaker 3: really critical as you're understanding fees in and understanding what
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  Speaker 3: may be put in front of you by an investment advisor.
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  Speaker 3: So we want to be clear in the financial planning
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  Speaker 3: and investment investment industry. Fiduciary financial advisors are managing client
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  Speaker 3: assets with their best interests in mind. And so what
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  Speaker 3: that will mean is, you know, they are looking critically
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  Speaker 3: at fees for you. They're also looking at what's the
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  Speaker 3: best strategy for you as you try to execute your
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  Speaker 3: retirement plan. So a lot of important words, but we
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  Speaker 3: do want to have clarity as you sit down, make
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  Speaker 3: sure you understand what exactly are you paying and what
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  Speaker 3: are you paying for?
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  Speaker 1: Real important and vital information this morning, So we talk
• 16:51
  Speaker 1: with Malia Quavis and Cjlass. They are our retirement planning
• 16:54
  Speaker 1: professionals from Class Financial, the website class financial dot com
• 16:58
  Speaker 1: that's coss k l a as Financial dot com and
• 17:00
  Speaker 1: their telephone number six so eight four four two five
• 17:03
  Speaker 1: six three seven. So CJ I hear about roboadvisor. Sounds
• 17:08
  Speaker 1: very very cool. Are there fees there to be aware of?
• 17:12
  Speaker 1: And you know, let's let's talk then about retirement plans
• 17:16
  Speaker 1: at work as well.
• 17:18
  Speaker 2: Yeah, how does the saying go? If there is no cost,
• 17:20
  Speaker 2: then you you are the product or you're the whatever
• 17:23
  Speaker 2: it is. You know social media, Oh there's no cost
• 17:25
  Speaker 2: to social media platforms. Oh no, no, no, you're being
• 17:28
  Speaker 2: sold to all the time. So there's a cost to everything.
• 17:30
  Speaker 2: The question is if it's explicit or implicit. So yes,
• 17:33
  Speaker 2: Roboa Advisors have fees as well. But I do just
• 17:35
  Speaker 2: want to clarify one thing there that that Malia went
• 17:38
  Speaker 2: through on the commission based advisors versus fee only versus
• 17:41
  Speaker 2: fee based. We used to be what is called a
• 17:44
  Speaker 2: hybrid firm where we could do commission or fees. So
• 17:46
  Speaker 2: if you have listened to our show long enough, you
• 17:48
  Speaker 2: might say, wait a minute, exactly how does cost Financial operate?
• 17:53
  Speaker 2: We about ten years ago embarked on a long term
• 17:56
  Speaker 2: initiative to drop our licensing as a commission based advisor.
• 18:00
  Speaker 2: It took many, many years and a lot of intentionality
• 18:03
  Speaker 2: for us to be able to do that, because you
• 18:04
  Speaker 2: can't just walk away from it everybody. It might it
• 18:07
  Speaker 2: might feel like you need to, but you actually can't.
• 18:09
  Speaker 2: We would have left a lot of clients in a
• 18:11
  Speaker 2: lurch if we had just dropped it without consideration. So
• 18:14
  Speaker 2: over many years, we took a lot of time to
• 18:16
  Speaker 2: drop our what we'll call registered representative or commission based
• 18:20
  Speaker 2: licenses so that we could sit on the air in
• 18:23
  Speaker 2: days like this and say we are a fee based
• 18:25
  Speaker 2: and or fee only advisor, depending upon how you define
• 18:28
  Speaker 2: that without the conflict of commissions. So that is a
• 18:32
  Speaker 2: big deal for us. It took a lot of tireless
• 18:35
  Speaker 2: hours of a lot of team members to get to
• 18:37
  Speaker 2: a place where we could say that. So anyway, if
• 18:39
  Speaker 2: you have any questions about that, feel free to call
• 18:41
  Speaker 2: us up or look at our registrations online. But yes,
• 18:44
  Speaker 2: back to this robo advisors. Many people will say, hey,
• 18:48
  Speaker 2: I don't well two things, I don't use an advisor
• 18:51
  Speaker 2: and so there is no fee, So let's just address
• 18:55
  Speaker 2: that relative to a robo advisor. Robo advisors think there's
• 18:59
  Speaker 2: two big ones out there right now, Betterment and Wealth Front,
• 19:02
  Speaker 2: and there's Vanguard has one as well. But it's this
• 19:04
  Speaker 2: idea of I am given a platform, often a technology platform,
• 19:09
  Speaker 2: with preordained or pre managed acid allocation models based upon
• 19:13
  Speaker 2: a list of questions that I give them or answer to.
• 19:17
  Speaker 2: They then build an acid allocation model that matches my
• 19:20
  Speaker 2: risk tolerance, timeframe, age, all those good things. And the
• 19:23
  Speaker 2: good news is because I'm not meeting with a certified
• 19:26
  Speaker 2: financial planner to do this, the cost is less than
• 19:29
  Speaker 2: it would be if I was meeting with a human advisor.
• 19:31
  Speaker 2: That's the idea of robo advisor so they execute on
• 19:35
  Speaker 2: the trades, they do the security selection, the due diligence,
• 19:38
  Speaker 2: they still have the fiduciary standard, YadA, YadA, YadA. You
• 19:42
  Speaker 2: pay point twenty five too point five percent per year.
• 19:45
  Speaker 2: That is cheaper than the example of what Milia talked about,
• 19:47
  Speaker 2: which was around one percent per year. However, if you
• 19:51
  Speaker 2: needed to add on an advisor to that, then the
• 19:53
  Speaker 2: advisor would lop on top of the robo. So for
• 19:56
  Speaker 2: those of you who are using robo advisors without an
• 19:59
  Speaker 2: add on advice, which many people don't know if they
• 20:02
  Speaker 2: are or not, but if you're using one without the
• 20:04
  Speaker 2: add on advisor, you are probably getting the acid allocation
• 20:07
  Speaker 2: model cheaper than you could if you worked with say
• 20:10
  Speaker 2: a firm like ours. What you are not getting is
• 20:13
  Speaker 2: any other advice. Right, there's no CFP saying how much
• 20:16
  Speaker 2: do you save into your four one K plan? What
• 20:18
  Speaker 2: other debt do you have? Have you considered ROTH conversions?
• 20:20
  Speaker 2: Are you doing pretext or ROTH? There's no questions. It's
• 20:24
  Speaker 2: just an acid allocation model that does security selection and
• 20:27
  Speaker 2: asset acid allocation models. So some people then say, well
• 20:32
  Speaker 2: I get it, CJ Okay, I don't do any of that.
• 20:35
  Speaker 2: I just trade on Schwab and I don't have an
• 20:37
  Speaker 2: advisor at all. Okay, well, you're still trading on a
• 20:40
  Speaker 2: platform that needs to make money somehow, so one of
• 20:43
  Speaker 2: two things would tend to apply there. Either you are
• 20:46
  Speaker 2: paying an internal expense at the mutual fund level, which
• 20:49
  Speaker 2: we'll talk about here in a little bit, those internal expenses.
• 20:52
  Speaker 2: It is a pay to play game everybody. So if
• 20:55
  Speaker 2: you are trading on a Fidelity platform and there is
• 20:58
  Speaker 2: no gplicit costs like a trade fee, that means that
• 21:03
  Speaker 2: that fund that is on that platform is paying part
• 21:07
  Speaker 2: of their internal expense back to that platform, if that
• 21:11
  Speaker 2: makes sense. So you may not see it explicitly, but
• 21:14
  Speaker 2: the internal fee to be on that platform then gets
• 21:17
  Speaker 2: paid back to Fidelity or Schwab or something like that. Now, again,
• 21:21
  Speaker 2: those fees would be much lower. An internal expense can
• 21:25
  Speaker 2: be anywhere ranging from we've seen as low as like
• 21:28
  Speaker 2: five basis points or two basis points. We've even seen
• 21:31
  Speaker 2: some come out with like completely free versions of these
• 21:34
  Speaker 2: for S and P five hundred funds as high and
• 21:37
  Speaker 2: up to as high as two percent per year in
• 21:38
  Speaker 2: internal expenses. But those internal expenses are what pay for
• 21:43
  Speaker 2: basically that security to come to market. So there's just
• 21:47
  Speaker 2: a little background on those who think they're not paying
• 21:49
  Speaker 2: any fee on the robo advisor platforms. Unfortunately you are,
• 21:53
  Speaker 2: or in the case of just trading on an outright
• 21:55
  Speaker 2: custodian each Rage Schwab Fidelity, you're still paying something. It
• 21:59
  Speaker 2: may just be lower.
• 22:00
  Speaker 1: Talking this morning with CJ. Colss and Molia Quavis. They
• 22:02
  Speaker 1: are our retirement planning professionals from Class Financial, the website
• 22:05
  Speaker 1: class financial dot com that's coss k l aas finance
• 22:09
  Speaker 1: dot com and they're telephone number six. So eight four
• 22:11
  Speaker 1: four two five six three seven. What about for folks
• 22:13
  Speaker 1: who are saying, well, the employer handles all of this,
• 22:16
  Speaker 1: are there fees there that people may be overlooking?
• 22:21
  Speaker 2: Yes? Again, so in the employer sponsored retirement world known
• 22:25
  Speaker 2: as four O one k's, four H three b's, things
• 22:27
  Speaker 2: like that, the Department of Labor Labor oversees us, and
• 22:31
  Speaker 2: there's an act called Employee Retirement Income Securities Act known
• 22:34
  Speaker 2: as a RISA that has laws that govern employer sponsored
• 22:37
  Speaker 2: retirement plans within this world. For a long time and
• 22:42
  Speaker 2: even to this day, there's been some research done on
• 22:46
  Speaker 2: just kind of like asking participants of four oh one
• 22:48
  Speaker 2: k plans if they pay a fee and if they
• 22:49
  Speaker 2: know how much, and it's something like sixty four percent
• 22:52
  Speaker 2: of them are unaware of any fees inside of the
• 22:55
  Speaker 2: four oh one K plans. Now I don't remember when
• 22:58
  Speaker 2: this this research was done, but it was done by
• 23:00
  Speaker 2: the Government Accountability Office a little while ago. So you
• 23:03
  Speaker 2: get the idea. Most people who participate in four one
• 23:06
  Speaker 2: ks go no. I don't see any explicit line item
• 23:10
  Speaker 2: of a fee, so there must not be anything. So
• 23:13
  Speaker 2: remember every product that comes to market in the form
• 23:16
  Speaker 2: of a bundled product like a mutual fund or ETF,
• 23:19
  Speaker 2: which is typically what trades or what is inside of
• 23:21
  Speaker 2: a four to one K plan, they almost always have
• 23:25
  Speaker 2: an internal expense ratio. So item number one if you're
• 23:28
  Speaker 2: going to have a four to one K plan is
• 23:30
  Speaker 2: be aware of the internal cost of the fund that
• 23:35
  Speaker 2: you own, that will that has the potential, I should say,
• 23:39
  Speaker 2: to drag on performance over long periods of time. Outside
• 23:44
  Speaker 2: of that, there can be other fees that sometimes are
• 23:49
  Speaker 2: inside of that besides the internal expense. So you can
• 23:51
  Speaker 2: take the cost of bringing the plan to market for
• 23:55
  Speaker 2: the employer and push that off to employees. You can
• 23:58
  Speaker 2: bring administrative fees of the third party administrator and push
• 24:01
  Speaker 2: that off to employees. And so a lot of times
• 24:03
  Speaker 2: please start to panic, going what do you mean? I
• 24:06
  Speaker 2: thought I was paying nothing, and now you're saying there
• 24:08
  Speaker 2: could be all these fees. Well, there's good news because
• 24:12
  Speaker 2: of some of the regulation around four to one K plans.
• 24:15
  Speaker 2: Now you can find this information through through a couple
• 24:19
  Speaker 2: of documents. First off, your summary plan description typically needs
• 24:22
  Speaker 2: to give some background on this, But if you want
• 24:25
  Speaker 2: fee specific information, go to your benefits department and ask
• 24:29
  Speaker 2: for a document called four O eight P two. So
• 24:33
  Speaker 2: again four O eight B two or a four O
• 24:36
  Speaker 2: four A five. The four OA B two is a
• 24:39
  Speaker 2: plan level fee summary that would be the fee summary
• 24:42
  Speaker 2: that applies to the plan regardless of who pays for
• 24:44
  Speaker 2: those fees. But the four O four A five is
• 24:47
  Speaker 2: actually the document that is the participant fee disclosure. Now,
• 24:52
  Speaker 2: if you talk to somebody in benefits and they don't
• 24:54
  Speaker 2: know what you're talking about, say well, I need to
• 24:55
  Speaker 2: talk to somebody at the actual company where the four
• 24:58
  Speaker 2: to one K is held, because they will know what
• 25:00
  Speaker 2: you're referencing. Every once in a while, benefits people don't
• 25:02
  Speaker 2: know what you're talking about. But four O four a
• 25:05
  Speaker 2: five must outline what are the fees that you could
• 25:10
  Speaker 2: be paying. Now, sometimes you get these documents and it's
• 25:13
  Speaker 2: like reading hieroglyphs. I'll warn you because a lot of
• 25:16
  Speaker 2: people don't know how to decipher. But take that document,
• 25:19
  Speaker 2: bring it to your financial advisor, your accountant, and have
• 25:22
  Speaker 2: them work through with you a summary of what it
• 25:24
  Speaker 2: is that your paying.
• 25:25
  Speaker 1: You know, we were talking too earlier CJ about statements
• 25:28
  Speaker 1: and receiving those statements. I think to look on those
• 25:31
  Speaker 1: statements that may be things that kind of q into,
• 25:34
  Speaker 1: kind of focus in on when it comes to looking
• 25:38
  Speaker 1: for some of these fees.
• 25:39
  Speaker 2: Yeah, good question, Sean. So what I would look for
• 25:42
  Speaker 2: on your statements would be a total asset based fees
• 25:45
  Speaker 2: or administrative fees. That would be one line item because
• 25:48
  Speaker 2: that would be say, say, there, you know it takes
• 25:50
  Speaker 2: five thousand dollars in administrative fees for your company to
• 25:53
  Speaker 2: bring the four oh in CA to market. They can
• 25:55
  Speaker 2: pay that i e. The company, or they can push
• 25:57
  Speaker 2: that off to participants. Or conversely, there's a third party
• 26:00
  Speaker 2: administration fee because there is somebody that has to do
• 26:02
  Speaker 2: recordkeeping and documentation and all that. So that fee and
• 26:06
  Speaker 2: the cost of that could be pushed off to participants
• 26:08
  Speaker 2: or paid for by the employer, and so if they
• 26:10
  Speaker 2: push it off to you, you would see that as
• 26:12
  Speaker 2: an explicit line item on your statement that is required
• 26:16
  Speaker 2: now under most circumstances, so you would look for are
• 26:18
  Speaker 2: there any administrative fees on my statements at the end
• 26:20
  Speaker 2: of the year. However, by far bar none, the biggest
• 26:25
  Speaker 2: fee inside of a four oh one K plan or
• 26:27
  Speaker 2: four or three B planned to be aware of is
• 26:29
  Speaker 2: your internal expense ratio, and that is pretty broadly disclaimed now,
• 26:33
  Speaker 2: by the way, so when you are selecting your securities
• 26:36
  Speaker 2: to be an inside of one of those plans, again,
• 26:40
  Speaker 2: these fees can range from zero point zero two percent
• 26:44
  Speaker 2: up to two percent, and those fees make a huge
• 26:48
  Speaker 2: difference over long stretches of time. So either either in
• 26:52
  Speaker 2: your case, be aware of it, or have somebody who
• 26:55
  Speaker 2: you know and trust, a financial advisor and accountant, a
• 26:58
  Speaker 2: friend who's in finance look it over and just give you.
• 27:00
  Speaker 1: Some feedback helpful information. This week, as always from a
• 27:03
  Speaker 1: retirement planning professionals from Class Financial talking with CJ. Closs
• 27:06
  Speaker 1: and Malia Quavis. We're gonna head on over to the
• 27:07
  Speaker 1: money Motion listener question corner as well as do the
• 27:10
  Speaker 1: class quiz clash leak. We will do that next. In
• 27:12
  Speaker 1: the meantime, I haven't been to the website yet. Check
• 27:14
  Speaker 1: them out colssfinancial dot com. That's Closs k l a
• 27:17
  Speaker 1: As Financial dot com and the telephone number six oh
• 27:20
  Speaker 1: eight four four two five six three seven. No charge
• 27:23
  Speaker 1: for that initial get to know the appointment ach Loss Financial.
• 27:26
  Speaker 1: It will be complimentary to you again their number six
• 27:28
  Speaker 1: oh eight four four two five six three seven. Take
• 27:31
  Speaker 1: it down the home stretch next as Money in Motion
• 27:33
  Speaker 1: with Coss Financial continues here on thirteen ten. Wiba chatting
• 27:40
  Speaker 1: this week with CJ. Class and Malia Quavis of Coss Financial.
• 27:43
  Speaker 1: Another great way to reach them is via email. If
• 27:45
  Speaker 1: you head on over to class Financial dot com, you
• 27:47
  Speaker 1: can submit your question for Money in Motion for the
• 27:49
  Speaker 1: listener Question corner. And this week Mark writes Sinny says,
• 27:53
  Speaker 1: as I'm within two years of retiring, I'm wondering if
• 27:56
  Speaker 1: i should be maximizing my contribution into my employer plan
• 28:00
  Speaker 1: the four h one K or pay down my mortgage
• 28:03
  Speaker 1: quicker looking for directions please, great.
• 28:07
  Speaker 3: Question, and of course our answer is it depends Mark
• 28:11
  Speaker 3: depends on some other extenuating circumstances which we don't have
• 28:15
  Speaker 3: the benefit of seeing for you. But so assuming you're
• 28:19
  Speaker 3: over fifty, because if you're going to retire the next
• 28:21
  Speaker 3: couple years, I can probably assume that in the twenty
• 28:25
  Speaker 3: twenty four you have to be aware that you can
• 28:27
  Speaker 3: put away a total of thirty thousand, five hundred into
• 28:31
  Speaker 3: your retirement plan, So that would be twenty fourth total
• 28:36
  Speaker 3: amount this year is twenty three thousand, but you have
• 28:38
  Speaker 3: a catchup because you're over fifty of another seventy five
• 28:42
  Speaker 3: hundred dollars, so a total thirty thousand, five hundred. So
• 28:45
  Speaker 3: we'd certainly encourage that you put away as much as
• 28:48
  Speaker 3: possible in these last years before retirement, because really we
• 28:52
  Speaker 3: want that nest egg to be as robust as it
• 28:54
  Speaker 3: can be as you enter retirement, and that's going to
• 28:58
  Speaker 3: enable you to be able to utilize it as a
• 29:00
  Speaker 3: component of your retirement income. You know, there might be
• 29:03
  Speaker 3: a pension, there's likely social Security, so this is definitely
• 29:07
  Speaker 3: going to be an important component. But the flip side
• 29:09
  Speaker 3: of things, if you've heard our show more than once,
• 29:12
  Speaker 3: you've probably heard that we would prefer that you enter
• 29:15
  Speaker 3: retirement with the least amount of debt as possible, so
• 29:18
  Speaker 3: hence that's where the depends comes in. So putting more
• 29:21
  Speaker 3: toward pain off the mortgage sooner definitely a positive move
• 29:24
  Speaker 3: since most people for most people as they enter retirement,
• 29:28
  Speaker 3: their mortgage does tend to be their largest fixed expense.
• 29:31
  Speaker 3: I know a lot of people question this right now
• 29:33
  Speaker 3: if they've secured mortgages with really low rates from a
• 29:36
  Speaker 3: few years ago. They're like, well, I'm not really worried
• 29:38
  Speaker 3: about it. But again, if we can slowly eradicate that
• 29:43
  Speaker 3: from your future payment a fixed payment, that would be
• 29:47
  Speaker 3: a wonderful thing and you'll be thanking this later. And
• 29:50
  Speaker 3: the third part of the equation is making sure always
• 29:53
  Speaker 3: that you do have emergency savings ample just like you
• 29:56
  Speaker 3: do now. We want that little portion of your financial
• 30:00
  Speaker 3: plan to also be supported because you know, life still
• 30:04
  Speaker 3: happens in retirement. You might need a new car, the
• 30:07
  Speaker 3: furnace might go out, so we want to make sure
• 30:09
  Speaker 3: you have funds in that bucket as well. So thanks
• 30:12
  Speaker 3: for the.
• 30:12
  Speaker 1: Question, great question, Mark, don If you can learn more
• 30:15
  Speaker 1: online Cossfinancial dot com. That's cost Financial dot dot com.
• 30:18
  Speaker 1: Time now for the class quiz question. The leak. It
• 30:20
  Speaker 1: works like this, just a moment, I'll ask you the
• 30:21
  Speaker 1: class quiz question leak. Then if thirty minutes, then from
• 30:24
  Speaker 1: the end today's program to call the Class Financial office
• 30:26
  Speaker 1: right here in Madison at six oh eight four four
• 30:28
  Speaker 1: two five sixty three seven. If you are the first
• 30:31
  Speaker 1: cost correct answer, win this week's prize, which is a
• 30:33
  Speaker 1: twenty five dollars gift card for food and laughs and
• 30:35
  Speaker 1: that'll cover several restaurants in the area. This week's class
• 30:38
  Speaker 1: quiz question leak Is this as true or false question?
• 30:41
  Speaker 1: When discussing investment fees, the term load refers to a
• 30:45
  Speaker 1: sales charge or a commission charged to an investor when
• 30:49
  Speaker 1: buying or redeeming shares in a mutual fund. Is that
• 30:53
  Speaker 1: true or false? Telephone number six oh eight four four
• 30:56
  Speaker 1: two five six three seven first cought correct answer when
• 30:58
  Speaker 1: the twenty five dollars gift guard don't forget as well.
• 31:00
  Speaker 1: That's Coss Financial's office right here in Madison. C. J. Mollia,
• 31:04
  Speaker 1: It's always great chatting with you guys. Enjoy this beautiful day.
• 31:06
  Speaker 2: Thanks a Sean.
• 31:07
  Speaker 1: See guys, Doctor Marty Greer comes your way next here
• 31:09
  Speaker 1: on thirteen ten WIBA. This is money in Motion with
• 31:12
  Speaker 1: Coss Financial. Asset Advisors LLC, a registered investment advisor registered
• 31:17
  Speaker 1: with the SEC. The contents of this show are for
• 31:20
  Speaker 1: informational purposes only and should not be considered individual investment advice.
• 31:25
  Speaker 1: Class Financial does not offer tax or legal advice. Any
• 31:28
  Speaker 1: opinion offered during the course of this show is the
• 31:31
  Speaker 1: opinion of that particular investment advisor representative, and not necessarily
• 31:36
  Speaker 1: the opinion of COSS. Financial News comes your way next
• 31:39
  Speaker 1: right here on thirteen ten, Wiba