Why am I being charged a separate advisory fee? Earlier in my relationship with Gaddis & Gaddis Wealth Management, or Premier Investment Advisors (or other advisors) there was no separate advisory or management fee, and I am told many other advisors do no

Do not be deceived by a stockbroker, registered rep or insurance agent implying there is no fee or cost on “their” product.  All professionals have business expenses, and they all earn a profit to take home to pay personal bills. The financial services industry has changed over time.  Many years ago, mutual funds and professionally managed accounts had all fees, commissions and costs included in the expense ratios charged by the managers and/or mutual funds.  These fees were disclosed in the prospectus and sales literature, but not disclosed as a separate line item and not disclosed in a total dollar figure. The fees were deducted from the accounts reducing your overall performance numbers.  So your “NET” annual performance was a combination of returns of your holdings, less the built in costs and fees.  The fees charged/collected by the mutual fund or manager was distributed three ways: 1) some retained by the fund company/investment manager, 2) some shared the associated brokerage firm (ex. LPL, Kestra, M. Lynch, Edward Jones, etc.).  The brokerage firm would share a portion 3) with your advisor.   These fees are not simply profit. The majority of the fees charged are used to cover the cost of overhead and expenses, research, employees’ salaries and other costs to provide their services to their clientele/investors.  Over time, and to offer more transparency, the industry has been converting to managed/advisory accounts where the mutual fund or investment sponsor only assess “their” part of the fee and the investment firm and your advisor’s fee is billed separately.  The mutual fund or investment manager fee is typically still assessed against the account and included in the expense ratio, but it no longer includes the part they charged in the past and then shared with the investment firm and your advisor.  The investment firm and advisors part of the fee is billed separately and disclosed in actual dollars on your quarterly statements. Depending on the amount of assets under management, the ballpark industry normal/average investment firm/advisors portion of the fee is in the range of one to one and a half percent +/-.  Typically, the larger the assets under management, the lower the percentage. In an effort to control the total cost to the investor, the “advisor” typically utilizes “institutional” share classes of the mutual funds or managers they recommend.  These “institutional” shares do not assess any upfront fees, they do not assess liquidation fees, they do not typically have any holding period restrictions, and they typically assess the lowest internal management fees of all share classes.  Most of the time the cost of the internal fees of the “institutional” shares, PLUS the advisory fee that is disclosed, is very comparable to the old fees where the total was blended into the performance, but with better disclosure.  We are happy to have in depth discussions and we are proud of the full disclosure we offer on this subject.  (In contrast, many stockbrokers, registered reps and insurance agents use Class A, B or C shares which can charge upfront fees, surrender penalties, impose 1-6 year holding periods, and have higher internal expenses than the institutional shares mentioned above.)