The Hidden Costs of Investing (and How to Find Them)

Welcome to Blue Chip Chats. My name is Gina DiGirolamo, and I’m a certified financial planner. This is the series where we sit down with advisors to break down complex financial strategies and talk about how they can fit into your plan. If you enjoy our content, be sure to like and subscribe to our channel so you don’t miss the next episode.

Thanks for joining! Let’s chat.

Today I’m here with Matt Mondoux. Matt is a certified financial planner, a Chartered Financial Analyst, and a Chartered Market Technician. Matt, thank you so much for joining me today.

You’re welcome.

Today we’re going to be talking about figuring out the all-in costs of investments. For anyone listening—whether you’re a do-it-yourself investor or you work with an advisor—we’ll walk through how to identify the types of fees you may be paying within your accounts.

To start, can you give a broad overview of what someone should be looking for?

Fees can get buried—sometimes intentionally, sometimes unintentionally. Most investors understand the advisory fee, which is typically an annual percentage paid to an advisor. That fee often ranges from 1% to 2%, and most people are aware of it.

Where things get more complicated is with underlying investment expenses, like expense ratios. That’s where costs can start to add up without the investor fully realizing it. There are also commission-based products, such as certain annuities or life insurance policies, which may include commissions and additional embedded fees.

Exactly. In those cases, an agent may receive a commission, and on top of that, there are often fees associated with the investments themselves and the cost of insurance.

You mentioned expense ratios. Can you explain what that means?

A simple way to think about it is that an advisor is using a product to outsource an investment strategy. For example, if an advisor wants U.S. stock exposure, they might select a mutual fund to manage that portion of the portfolio.

That mutual fund is typically managed by an investment firm, and they charge a fee—known as an expense ratio—to manage that investment. So a client may pay both the fund’s expense ratio and an advisory fee for overall portfolio management.

There’s also another type of fee that’s fairly common, associated with separately managed accounts. These are similar to mutual funds, but the client owns individual securities directly. They may see trades happening in their account and feel like they have a customized portfolio.

However, separately managed accounts also carry fees, and sometimes those fees can be higher. Clients may not always realize they’re invested in these products or understand the full cost.

If you’re meeting with a new client and reviewing their statements, what are you looking for to uncover these fees?

We start by identifying mutual funds and exchange-traded funds, which have expense ratios. Then we look at statements from months when advisory fees are typically billed—often January, April, July, or October.

Advisory fees usually appear as a line item. Separately managed account fees may also appear on the statement. For mutual funds and ETFs, we need to dig a bit deeper by reviewing fund prospectuses or researching the fund online to find the expense ratio.

Those details are accessible, though not always obvious.

The key point here isn’t that fees are inherently bad—it’s that investors should understand whether the fees they’re paying align with the value they’re receiving.

That’s exactly right. The first step is understanding the all-in cost by adding together advisory fees and investment management fees. For example, if product fees total 0.5% and the advisory fee is 1.5%, the all-in cost is 2%.

Once investors understand that number, they can evaluate whether the services they’re receiving—planning, tax advice, estate considerations, retirement plan guidance—justify the cost. Price is what you pay; value is what you get.

To wrap things up, what are the key takeaways?

First, investors should understand their all-in fees, including advisory and investment management costs. Second, they should evaluate the value they’re receiving in return—comprehensive planning, tax guidance, retirement plan support, and more. Third, investors should understand their investment statements, including how they’re allocated and what fees exist within their investments.

If you’d like a second set of eyes on anything we discussed today, reach out to us at Blue Chip Partners.

Matt, thank you so much for joining me today.

Happy to be here.

And thanks for watching Blue Chip Chats. Can’t wait to chat again soon.