When reviewing your investments, it's natural to focus on performance. But there's another important question to ask:
What am I paying—and what am I receiving for those costs?
Investment fees can take several forms. Some are clearly shown on statements, while others are incorporated into the expenses of an investment. Understanding the different types of fees can help you evaluate the total cost of investing and make more informed financial decisions.
What Are Investment Fees?
Investment fees are costs associated with buying, selling, owning or receiving professional services related to investments.
Depending on your accounts and investments, you may encounter several types of fees.
1. Financial Advisory Fees
If you work with a financial advisor, you may pay a fee for investment management, financial planning or other ongoing services.
One common arrangement is an asset-based advisory fee, calculated as a percentage of the assets being managed. Other arrangements may include flat, hourly or subscription fees.
When evaluating an advisory fee, consider both the cost and the services you're receiving, which may include portfolio management, financial planning, retirement planning, rebalancing and ongoing reviews.
2. Commissions
A commission is generally a transaction-based charge associated with buying or selling certain investments through a brokerage relationship.
Instead of paying an ongoing advisory fee, an investor may incur a commission or sales charge when a transaction occurs.
Neither compensation structure is automatically better. The appropriate arrangement depends on the investor's circumstances, the investments involved and the services being provided.
3. Expense Ratios
Mutual funds and exchange-traded funds (ETFs) generally have ongoing operating expenses.
An expense ratio represents a fund's annual operating expenses as a percentage of its average net assets. These expenses may include investment management, administration and other operating costs.
Because these expenses are deducted from fund assets, you may not see them as a separate charge on your statement—but they still affect your investment return.
Is an expense ratio the same as an advisory fee?
No.
An expense ratio is associated with the investment fund itself. An advisory fee generally pays for professional investment management or advisory services.
Depending on your account, you could pay both.
4. Mutual Fund Sales Charges and 12b-1 Fees
Certain mutual funds may have sales charges, sometimes called loads.
A front-end sales charge is generally paid when shares are purchased, while certain deferred sales charges may apply when shares are sold.
Some mutual funds also have 12b-1 fees, which are paid from fund assets for distribution-related expenses and, in some cases, shareholder services.
A fund described as "no-load" doesn't necessarily mean there are no costs. It may still have operating expenses and other applicable fees.
5. Account and Administrative Fees
Depending on the financial institution and type of account, you may also encounter:
- Account maintenance or custodial fees
- Retirement account fees
- Wire or transfer fees
- Account termination or transfer fees
- Certain transaction charges
Not every firm charges these fees, and some may be waived under certain circumstances.
6. Annuity and Insurance-Related Expenses
Certain annuities and insurance products may have multiple expenses depending on the specific contract.
For example, a variable annuity may include mortality and expense risk charges, administrative expenses, investment option expenses and charges for certain optional benefits.
Some products may also have surrender charges if money is withdrawn beyond permitted amounts during a specified period.
Because contracts vary considerably, reviewing the applicable prospectus, contract and disclosures is important.
Are Lower Investment Fees Always Better?
Not necessarily. Cost is important, but it is only one factor to consider.
Investments and financial services can have different costs because they provide different strategies, services, features or benefits.
Instead of simply asking:
"Which option has the lowest fee?"
Consider asking:
"What am I paying in total, what am I receiving for that cost, and does it fit my financial needs and objectives?"
Fees should be considered alongside investment objectives, risks, services, time horizon, liquidity needs and other relevant circumstances.
Why Do Investment Fees Matter?
Fees reduce the amount of money that remains invested. Over longer periods, differences in ongoing expenses can have a meaningful effect on investment results.
That doesn't mean investors should automatically choose the least expensive option. It does mean they should understand what they're paying.
Where Can I Find My Investment Fees?
Depending on the investment or account, fee information may be found in:
- Account agreements and fee schedules
- Form CRS
- Form ADV for advisory relationships
- Mutual fund or ETF prospectuses
- Annuity prospectuses and contracts
- Trade confirmations
- Account statements
If you're unsure, ask your financial professional to explain both the fees you pay directly and expenses associated with the investments you own.
Questions to Ask Your Financial Advisor
Consider asking:
- How are you and your firm compensated?
- What fees am I paying directly?
- Are there expenses within my investments in addition to my advisory fee?
- Are there commissions, sales charges or surrender charges?
- What services am I receiving for the fees I pay?
- Where can I see my fees in writing?
The Bottom Line
Investment fees aren't inherently good or bad—but they should be understood.
Looking at only an advisory fee, commission or expense ratio may not provide the complete picture. Depending on your account and investments, multiple expenses may apply.
A good question to periodically ask is:
"What is my total cost of investing, and what am I receiving for it?"
Understanding the answer can help you make more informed financial decisions and have more productive conversations with your financial professional.
References
- U.S. Securities and Exchange Commission. “Understanding Fees.” Investor.gov.https://www.investor.gov/introduction-investing/getting-started/understanding-fees.
- U.S. Securities and Exchange Commission. “Mutual Fund and ETF Fees and Expenses: Investor Bulletin.” Investor.gov, July 2025. https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/mutual-fund-and-etf-fees-and-expenses-investor-bulletin.
- Financial Industry Regulatory Authority. “FINRA Rule 2210: Communications with the Public.” FINRA.https://www.finra.org/rules-guidance/rulebooks/finra-rules/2210.
Disclosures
This material is for informational purposes only and is not intended as tax, legal, or investment advice. Investors should consult with their tax advisor or financial professional regarding their individual situation.
Investment products, account types, compensation arrangements, fees and expenses vary. Investors should review applicable prospectuses, account agreements, Form CRS, Form ADV, fee schedules and other disclosure documents before making investment decisions.
Investing involves risk, including the possible loss of principal. Lower fees do not necessarily indicate that an investment, product, account or financial service is more appropriate for a particular investor. Costs should be considered together with investment objectives, risks, features, services and individual circumstances.