I’ve always had this theory that if you see an employee of a restaurant eating at that restaurant, then it’s a very good sign.

The same goes for finance.

One of my favorite clients was the COO of corporate banking with Bank of America/Merril Lynch (BoA/ML), and since she was an employee, she kept her retirement savings and advisor through them.

We met through a mutual friend and started discussing her retirement planning and investments.

When she came in, she believed she was only paying the discounted employee rate of 80 basis points, which is not a bad rate if it’s done correctly and ALL services are being provided (not just investment management).

But it turned out that they were charging her those 80 basis points plus an additional 30 to 35 basis points for the “privilege” of being a “Private Client” for certain investments.

(Now, what does “Private Client” mean?

Private Client is one of those clever terms that simply means BoA/ML is outsourcing the actual trading, then charging the client to do it.

They will usually make it sound like some special thing that you have to have enough money to get into…But it’s all just outsourcing the trading.

That’s right: outsourcing the work and then charging the client to outsource the work.

To add insult to injury, when the portfolio underperforms (because it will underperform since it is actively managed; more on that another time), the managers will justify it by saying it earned less return because they cut out more risk.

But all that means is that they perceived a risk, adjusted for it, and were wrong…

This is why active managers underperform.

Wells Fargo, Fidelity, Morgan Stanley, Citibank, and most other big-box firms outsource their trading and then charge you for it.)

Despite the fact that she was an employee, BoA/ML had no problem tacking on fees to save themselves time and effort.

That was the straw that broke the camel’s back, and she couldn’t wait to get away from BoA/ML.

Luckily, she moved up and out of BoA/ML and hasn’t looked back.

If it can happen to a COO at BoA/ML by BoA/ML, the chances are you are also getting unneeded fees tacked on.

Be sure to talk to your advisor about the fees they are charging.

Just ask them outright.

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