According to Rebalance IRA, retirement accounts have an average of 1.5% in fee deductions each year. The confusion is understandable as common fees are often grouped into other expenses on account statements rather than listed separately. Fees eat into the bottom line of your returns, so take the time to talk with your financial advisor about what you’re paying.

Transaction Fees

Transaction fees are charged by a broker to buy and/or sell investments such as stocks or mutual funds. In an active investing account the transaction fees are likely to add up quickly, but in a passive or index investing account they will be much smaller.

These fees can range depending on the investment product traded in your account, so make sure you take this into consideration when opening an account. For example, a $50 transaction fee on a $50,000 trade is only 0.1%; however, a $50 transaction fee on a $5,000 trade is 1%. These can add up quickly, significantly eating into profits.

Financial Advisor Fees

Common fees you will encounter throughout the investment world are the traditional trade commission and advisor fees. Trade commissions are charged by your broker on stock and exchange-traded funds, typically per trade.

A registered investment advisor (RIA) will typically charge you a fixed amount or a percentage of the assets under management. Find out if the fees the advisor charges are quarterly or annually. For example, an eye-catchingly low .35% per quarter looks good on paper, but when you expand that over the year, the 1.4% annual fee and how it might affect your long-term portfolio performance is something you should take into consideration.

Account Fees

These fees might be grouped into other expenses or lumped in with other expenses. Front-end and back-end loads are fees charged right after the initial purchase of an investment and at the time of sale. Another common account fee is the custodian fee, a fee for simply having an open account.

Different types of investments – ETFs, mutual funds and annuities – have their own fee structures, so make sure you ask your advisor to distinguish between each investment, should you have multiple. Before hiring a financial advisor, ask how they will be compensated. This gives you the opportunity to see how transparent an advisor is when handling an account.

Learn more about how Zacks Advantage combines the simplicity and low fees of a robo advisor with performance-focused active management. Download our Overview Guide today!

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss

Zacks Advantage is a service offered by Zacks Investment Management, a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. All material in presented on this page is for informational purposes only and no recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Nothing herein constitutes investment, legal, accounting or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.