This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Watch Your Fees

Stocks in this article: JPM C GS

Mutual funds are often expensive -- they charge management fees and marketing fees that are too burdensome for the performance they typically deliver. There are some exceptions to this, but people like John Bogle, the founder and former CEO of the Vanguard Group, have made a very convincing case that low-cost, passively managed index funds are a far superior investment for most investors than actively-managed, high-cost mutual funds. The majority of fund managers under-perform major market indices, after all.

Investment advisers are a good option for people who want help and guidance with their investments, but the customer needs to make sure the adviser is truly independent. As The New York Times recently reported , former J.P. Morgan Chase (JPM) advisers say they were encouraged to funnel customers into the bank's mutual funds even when the advisers knew it was not in the best interest of the client.

"I was selling J.P. Morgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm," Geoffrey Tomes of Urso Investment Management told the Times about his tenure at the bank, which ended last year. "I couldn't call myself objective."

That's a damning indictment of the quality of J.P. Morgan's commitment to serve its clients, but once again, it comes as no surprise in this era of financial malfeasance and overwhelming public distrust of major financial institutions, like J.P. Morgan, Goldman Sachs (GS) and Citigroup (C).

It also underscores an important point about investment advisers. They collect their own annual fee but if all they're doing for clients is shoveling money into funds and other vehicles, which charge their own set of fees, the real cost to the client is in fact much higher -- and it's very damaging.

So, investors that are evaluating advisers to manage their investments should question them carefully on their independence. Are they incentivized in any way to put clients into one type of investment as opposed to another? And how expensive are the investment vehicles that the adviser would prescribe?

If an adviser is less-than-forthcoming on such questions, I would find someone else.



At the time of publication the author had positions in JPM and C but not in the other stocks mentioned.

Follow me on Twitter @NatWorden

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This contributor reads:
The Oil Drum
The Baseline Scenario
I Want Media
Zero Hedge
Gregor Macdonald
Chris Martenson
On Twitter, this contributor follows:
Doug Kass of TheStreet
Jesse Eisinger of Pro Publica
Daniel Alpert of Westwood Capital
Barry Ritholtz
Joshua Rosner, managing director of Graham Fisher & Co.
Bob Lefsetz, a music industry blogger

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs