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Updated on Tuesday, April 21, 2020
When it comes to maximizing your financial potential, investing in markets should be a top priority. The tools investors have at their disposal to start the investing process include robo-investing platforms and online brokerages — both of which may charge a multitude of fees.
But how much do investors know about the fees they’re being charged? A MagnifyMoney survey reveals that a whopping 64% of investors don’t even know how to check which investing fees they are being charged, a potentially costly mistake.
- Nearly 73% of investors don’t know exactly how much money they paid in investing-related fees last year. Meanwhile, 64% of investors we spoke to don’t even know how to check which fees they’re being charged.
- One in four investors don’t know if they pay any investing-related fees at all. Another 31% know they’re charged fees, but don’t know what they are or what they’re for. Less than half (44%) know exactly what fees they’re responsible for.
- Around 45% of investors have been charged an unexpected fee. The top five most surprising fees were account fees (19%), administrative fees for 401(k) (16%), stock trading fees (14%), mutual fund transaction fees (11%) and annual fees (9%).
- Nearly one-third of investors have felt misled by a broker or investment company’s investing-related fees, saying those companies should be more upfront about their fees.
- About 2 in 3 investors say fees have a high impact on their investing decisions, and another 19% say fees impact their decisions, but to a lesser extent. 31% of those who have switched investment accounts did so to avoid or reduce fees.
- Meanwhile, 17% of investors are worried fees are “killing” their retirement savings. Another 35% think fees somewhat hurt their retirement savings, but not by a lot. Approximately 20% of millennials think fees are killing their retirement savings.
- About 76% of investors said they don’t pay much attention to investing management fees because they’re such a small percentage of earnings. Around 66% said they don’t pay much attention to trading fees because they’re a buy-and-hold investor.
Most people are clueless about investing fees
Our survey found that an overwhelming amount of investors don’t know how much they’re forking over in fees, or even how to find out which fees they’re being charged.
Overall, 21% of investors did not know how much they paid in investing fees in 2019. In addition, a significant 17% of investors said they paid nothing in fees in 2019, which is likely not the case.
Interestingly, we found that baby boomers were the generation most likely to be clueless about how much in investing fees they paid in 2019 (31%), followed by Gen Xers (18%) and then millennials (16%).
In addition to being in the dark about how much they paid in fees, a staggering number of investors also didn’t know which fees were even associated with their investment accounts: 25% of investors did not know if they were paying fees on their investment accounts, while 31% said that they knew that they paid fees, but were not sure what those fees were.
Even if they wanted to check and see which fees they are being charged, many investors don’t know where to look. Our survey found that a whopping 64% of investors do not know how to check which investing fees they may be getting charged, a percentage that was relatively consistent among all generations.
How much people are paying in investing fees
Despite a worrisome percentage of people who are uninformed about how much they’re paying in fees, a decent-sized minority (27%) said they know the exact dollar amount of investing fees they paid in 2019.
Some respondents are paying significant amounts in fees: 5% said they paid between 1.1% to 1.5% of their invested assets in fees, 8% responded they paid between 0.76% to 1.0%, and 8% said they paid between 0.51% to 0.75% in fees. On the lower end, 16% of respondents said they paid between 0.25% to 0.50% of their invested assets, and 20% said they paid less than 0.25%.
Our survey also identified the most prevalent types of investing fees people are paying. The most common fees in 2019 were account fees (29%), followed by 401(k) administrative fees (28%), stock trading fees / trading commissions (23%), mutual fund transaction fees (15%), annual fees (12%), management/advisory fees (11%) and expense ratios (7%).
Only 4% said they paid an account transfer fee in 2019, 3% said they paid a platform fee, 3% said they paid a margin fee, 2% said they paid an options contract fee and 2% said they paid an inactivity fee.
A noteworthy 25% of survey respondents said they did not know what kind of fees they were paying. In that same sentiment, our survey revealed that 32% of people overall felt that they had been misled by a broker or investing company about investing-related fees, and think that they should be more upfront about the fees that they are indeed charging. Of the people that felt misled about fees, 36% were millennials, 35% were Gen Xers and 17% were baby boomers.
How fees impact investing decisions
Fees not only have the potential to eat into your returns, but the results of our survey reveal that they can also influence investing decisions, which could be incredibly impactful on your finances.
In fact, 30% of survey respondents overall said that fees have a very high impact on their investing decisions, and 34% said that they have somewhat of a high impact on their decisions. Additionally, 17% of people said that even worry that fees are actually killing their retirement savings. If you worry you’re paying too many fees for your current financial advisor, browse our list of advisors and learn more about their fee structure.
In some cases, the impact that fees have on investing decisions could be costly: 23% of survey respondents said that because of fees, they invested less money, 21% said they trade less often, 18% said they keep their level of risk low, 16% said they waited longer to invest, 11% said they spent their money instead of investing it and 11% said they selected their broker based on fee structure. Interestingly, though, 5% of respondents said that fees caused them to actually try higher risk strategies.
A decent amount of people have taken drastic action, too, to avoid or minimize fees – we found that 31% of people have actually switched investment accounts to avoid or reduce fees and 28% of people have opened a new brokerage account within the last year specifically because it offered fee-free stock trading.
For its survey, MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,045 Americans with an investment account. The survey was fielded Nov. 25-29, 2019, and the sample base was proportioned to represent the overall population.
For the purposes of our survey, we defined generations as: millennials are ages 23-38, Generation Xers are ages 39-53 and baby boomers are ages 54-73.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.