The fees that investors pay to financial professionals for their advice and services come in two basic forms: transaction fees and ongoing fees. While professionals may differ in what fees they charge, they are required to fully disclose them.
TRANSACTION FEES
These fees are generally one-time fees assessed at the time a transaction is made. Examples of transaction fees include:
COMMISSIONS
Paid on the purchase and sale of a stock.1
MARK UPS / MARK DOWNS
Occur when a broker-dealer sells or buys an investor a position that it owns. FINRA guidelines ensure the prices paid by investors are reasonably related to the market for the security.2
SALES LOADS
The sales charge for buying a mutual fund. They may either be front-end (charged when you buy the fund) or back-end (charged when you sell the fund). Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
SURRENDER CHARGES
This fee is assessed when an investor sells an annuity prematurely. Generally, it is a percentage of the amount withdrawn.3
REDEMPTION CHARGE
A charge some mutual funds assess if a fund position is not held for a prescribed period of time.
ONGOING FEES
These fees are levied for as long as an investor remains in a particular investment or investment platform. They typically are calculated as a percentage of assets. Examples of ongoing fees include:
FEES FOR PROFESSIONAL INVESTMENT SERVICES
These are the fees an investment professional charges to manage assets.
ANNUAL OPERATING EXPENSES
Mutual funds and exchange traded funds (ETFs) have ongoing fees that pay for the management of assets and any administrative and service (or distribution) fees. ETFs also are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
ANNUAL VARIABLE ANNUITY FEES
In addition to the annual operating expenses of the funds contained in an annuity, an annuity may have additional service fees, administrative charges, and insurance costs. Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.
COMBINED FEES
Some products or investment platforms may charge a combination of transaction fees and ongoing asset-based fees. Examples include:
ETFS
When you invest in an ETF, there is a transaction fee at the time of purchase and when it is sold, as well as an ongoing fee to manage the fund.
MUTUAL FUNDS
Funds may be sold with a sales load and also assessed ongoing fees.
INVESTMENT PROGRAMS
While most programs offer an inclusive ongoing fee for advice and transactions, some programs may charge both forms of fees.
DON’T BE AFRAID TO ASK QUESTIONS
Investors should be aware of what they are paying for a professional’s services and advice. Don’t hesitate to ask questions like “How do you get paid?” or “Do I have a choice of how I pay you?”
