EPS 29 – Fees in Financial Products: The Hidden Cost of Money and Why Good Advice Matters

In this episode of the Pink Money Podcast, Jerry Williams, MS-PFP, explores one of the most overlooked aspects of personal finance: the true cost of fees in financial products.

From annuities and life insurance to mutual funds and advisor commissions, Jerry explains how hidden expenses can quietly drain your portfolio over time. He also discusses the risks of chasing “hot stock tips,” the importance of reviewing your investments annually, and why professional guidance in both taxes and financial planning is often money well spent.

You’ll learn:

• The difference between transparent and hidden fees in products like annuities, insurance, and mutual funds.
• Why “cheap” can be costly if you don’t understand expense ratios and commissions.
• Common mistakes independent contractors make with tax deductions (and why the IRS comes knocking).
• How to balance DIY investing with smart use of financial professionals.

💡 Takeaway: Paying attention to fees and expenses isn’t just detail work — it’s protecting your future wealth.

💬 Have a question or comment? Contact Jerry here

Transcript

UNKNOWN: 0:01

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SPEAKER_02: 1:06

Welcome to the Pink Money Podcast. This is Jerry, and we talk about all things related to money from a gay perspective. And this is season three. You know, it's been a little while since I've spoken to you, and hey, things happen in our lives, things get in our way, but hey, here we are. So let's go. And, you know, today, what I really wanted to talk to you about, you know, is about a conversation I had with a guy. So we were kind of swapping stories. And I was telling him a little bit about my background. You know, I've been a financial advisor for 20 some odd years. And, you know, I have a master's degree in personal financial planning. And what he asked me was, well, what kind of advice would you give someone? And I thought about it, and I think sometimes people want a great stock tip or some sweet investment opportunity that they may not know or understand. And all things like that are possible. I don't really like giving stock tips because unless you really are ready to invest and lose your money, you probably shouldn't do it because... Hey, what do I know if a stock is going to go up and down or sideways, right? I don't know. I mean, I'm hoping it goes up. And if you took my recommendation and you jumped into it and it went up, great. Hallelujah. I must be a sage. But if it goes down and you lose your money and then you curse me out, then you're like, that idiot doesn't know anything. And you would probably be right. Because again, I don't know what a stock is going to do. We hope it goes up, like I said, but often it doesn't. So nevertheless, What really came to mind though, and what I started telling him, is I think when you want to buy a financial product, you really have to understand the expenses. And I've spoken about this a couple times, but I guess it really bears repeating because I think that this is the part that is not very transparent to most people and most financial advisors or sales reps or whatever they want to call themselves, that they will sell you something and they have an obligation to tell you what their fee is going to be, especially if it's commission-based or if it's a front-end load or what have you. They're supposed to disclose all that, and they can tell you that pretty easily. They can also tell you some of the internal fees, but those are not readily apparent fees. And it can be very confusing. They may even just gloss over them. But ultimately, it is a part that you really need to get a handle on because it's going to be a big part of your world. And what I mean by that is if you buy into something, let's just say an annuity, and I'm going to say right off bat that annuity All financial products have pluses and minuses, okay? So you can't paint everything with a broad brush, although there are some people who do. Like, let's say annuities are like, oh, they all suck, you know, you should never get into one, they're all terrible, blah, blah, blah, blah, blah. And there's a point there, but, you know, on the other hand, there's some really good ones, good reason to be in an annuity as well. And I'm not going to belabor that point. What I'm really talking about, again, is expenses and where they are and how to see them and what you can do to really get your arms around them. Because as your portfolio grows and you're in this for one year, two years, five, ten, whatever it is, then those fees are going to always be there and they're going to be taking a part of your money. That sales advisor who you originally spoke with, he or she is long gone. They got their money up front. They went on to the next customer, and who knows where they are today. So you're not going to be able to go back to that person typically. You can go back to the company, and you can have them explain some things to you and get your statements. You can pour over them, and you can glean whatever you can from them. But again, the expense ratio is really something that you really want to understand well. Like life insurance is another product that is not clear what you're paying. And it's never explained very well. So, you know, as your portfolio is in this product or multiple products, that's usually the case. You don't normally have just one. You have multiple financial products, especially when you build a portfolio over time. So all these expenses are eating away at your money. So as hopefully your portfolio is growing, there's also something that's being taken out. Is that all bad? No. And the reason why is because if you could do these things for yourself, you would. Like stock picking. If you could pick all the stocks you want, which you can, are they all going to grow? I don't know. Are you going to stay on top of them? I don't know. Maybe you're really good at watching your money and making those tough decisions about whether to buy, hold, sell. But maybe you aren't, you know, there's always that sentimental reason sometimes why people hold on to stocks, you know, oh, grandpa had this, la la la. But oftentimes, you just have to let it go, right? So if you can dispatch yourself from your emotions, and just let, you know, pure analytical reasoning guide you, then you can, you know, maybe make tougher calls and be good with it. Some people day trade and they're in and out, in and out, in and out, and that's how they make their money, but other people just leave it, leave it, leave it, and never even turn their attention to it. And then after some time, they look at it and go, ooh, I haven't looked at this in like five years. So, Yeah, you should be, number one, paying attention to money, and number two, you should be reviewing it on at least an annual basis, if not just with your own eyes, you know, get your financial advisor to look over it with you. Now, just speaking about that, not to go off on a crazy tangent about that, but, you know, most advisors, wealth managers, whatever they're called, you know, they have their hands full. They have a lot of people in their book. And they've got a lot of people they got to talk to on a day in and day out basis. And they have their quotas, numbers, all their metrics they have to meet. So they are really humping it, usually. If they're good, they are really humping it. And they got a lot of things on their plate. So yeah, there is a requirement usually from most firms that you meet with all the customers in your book on an annual basis. And if you have two, 300 people in your book, You can see that that's going to be pretty tough. There's only so many hours in the day. And you've got to schedule this and you have to get everybody in and you have to pull the numbers and you have to create the report. And then you have to, you know, spend time with your client and, you know, go over the entire thing and they're going to have questions for you. So it's not a 20 minute meeting, usually, you know, an hour at best. And you know, that's generally all you're really going to get with your financial advisor, even though you're paying him or her, you know, let's say a 1% fee every year, right? So you're paying them a good amount of money and you're not going to spend a whole lot of time with them. Now, the more money you have and, you know, the more money you're paying them, then yes, you are typically going to have a much closer relationship with your financial advisor, right? I mean, you've got...$10,$20,$30,$100,$200 million with a firm, you're probably going to be paid closer attention to. But on the other hand, if you're with Fidelity or Schwab or go on and on and on, you're not the only one with a couple hundred million dollars. Now, if you've got a couple billion dollars, again, you're in the upper echelon then. of rarefied air where you probably have someone working directly for you and they're paying very close attention to your money right because they don't want to lose that gig they don't want to lose your money and they know that you could replace them in a heartbeat so they can't replace 200 you know a million or they can't replace two billion dollars easily right there's not that many fish you know wallowing around with that kind of money that are just waiting for someone to come pick them up they've already been taken so you've got to be you know savvy you have to kind of push for what you want and when it's time for you to schedule your annual review with your portfolio manager if you are if you don't hear from him or her then you make sure that you pick up the phone and you schedule it yourself. Let's say, you know, March 1, whatever it is. Every year, March 1, at least, you have your annual review. If you need to call him or her at the end of the year because you got some dividends or capital gains you want to go over or maybe you need to do some tax harvesting by the end of the year or you got a required minimum distribution that needs to be taken, Those can be a secondary conversation where you can talk about, you know, hey, what do I need to buy, sell, get rid of, whatever it is. You know, if I need some cash, there's none in my portfolio, you know, what do I need to sell to free up the cash? You know, that's a good opportunity, especially at the end of the year. Don't want to wait until 1231, mind you, right, because they're busy. And that's a hell of a time to be trying to squeeze in. So you want to do that earlier. You know, November is a good time. So that again, there's not a huge rush at the last minute. Kind of like, you know, tax day, right? April 15th, everyone's scrambling to get their taxes in. Those that, you know, kind of laid back and forgot about it. But that is, that's something else. You know, I digress. So let me just get back to expenses. So again, you really need to be aware of where these expenses are. And that's where these professionals come in. Now, if you're buying direct from the company, Let's say it's, I don't know, nationwide, you know, whatever it is. You know, if you bought a life insurance policy, you bought an annuity, you bought whatever financial products you got from them, then you can go straight to the horse and you can ask them, explain to me, you know, what the fees are that are associated with this and the financial product I have. Not generally, you want to know specifically. Now, certain things aren't readily apparent every day, like in a mutual fund where the expense ratio is pretty much easy to calculate. But another thing is it's not as clear. But, hey, that's not your problem. That's theirs. They need to dig that information out and tell you so that, again, you know, right? You need to know. If you're paying$87 a year for that one financial product, Okay, it is what it is, right? And is that a good deal, bad deal, you don't care deal? Will it go lower, higher? You don't know. Find out, right? You need to ask those kind of questions. That's all I'm saying. So I was giving this advice and he nodded his head and he said, yeah, that's really good advice. So It just reminded me that sometimes, yeah, maybe somebody is looking for a hot stock recommendation, but oftentimes a good recommendation is just saying pay close attention to your money. As you're building your portfolio, these kind of things can be hidden, buried, and you need to ferret them out so that you know exactly what you're paying. That's all I'm saying. Another thing that kind of jumped into my mind, I might as well say it now while I'm thinking about it, You know, especially when we're talking about advice and guidance. You know, when it comes to taxes, yes, you can do your taxes on your own, just like investing. You can do all that on your own. Should you? Maybe. You know, I don't know. It depends on your experience, your understanding, your education, and just how much you want to do on your own. So, you know, instead of buying individual stocks, yeah, you can go ahead and buy an ETF or a mutual fund, right? Those are easy ways to do. You can buy direct from whatever investment company you want, usually, or, you know, get yourself a financial advisor and he or she can make some recommendations to you and point you in that direction or craft a portfolio with you based on your level of risk and timeframe, et cetera. But when I recently was speaking with somebody regarding taxes, and now this is someone who's younger, but it kind of reminded me that this could be anybody. But what they were half complaining about and half beating their chest about is that in their taxes that they were a 1099 employee, so somebody who's an independent contractor. They're not a W-2 salaried employee. The company's not keeping them on. They could fire them at any time because there's this 1099. They come and they go, right? Right. Like, even if you're doing a gig work, like, you know, Uber, Lyft, DoorDash, whatever it is, you know, you're$10.99. So, nevertheless, he was saying that he was proud of the fact that he was able to claim such a high deduction because he deducted everything. And I was like, what do you mean everything? And he's like, wow, anything I can, like food, like, you know, whatever. And it took me back a little because, you know, specifically food. I'm like, you can't deduct food, okay? You just can't. Everybody has to eat. You know, that's life-sustaining. Now, if you took a client to lunch, dinner, and you discussed whatever business is pertinent to you guys, and you deducted it on your taxes, and you were able to back it up with receipts and everything, an explanation about the reason for this meeting, who you met, and the reason for the meeting. Because only in that circumstances would you be able to deduct that. And lo and behold, what he ended up sharing is that he'd been audited by the IRS. Well, of course, that's not surprising. If you're taking all these deductions where they're not really allowed, well, it's no wonder they flagged your return. Because you can't deduct anything. everything or no matter what business you're in not everything is deductible you have to know what is deductible and how much can you take for that deduction and what are the reasons and situations that you can deduct it and that's where a text professional can really be handy and they can help you know give you those explanations as you turn in all your receipts or you you know have this conversation about what you've been attempting to do You can try your hand at TurboTax. I'm not saying they're bad, right? I don't know. I don't know if they're good, bad, but they wouldn't be in business if they were terrible. That's what I would think. But anyway, you get what you pay for, and I think everybody knows that. So if you really don't know what you're doing, you need to get professional advice, guidance. You go to a doctor for a reason. You can't write your own prescriptions. You might have a difficult time diagnosing yourself. You go to an attorney. When you need their assistance, I watch a lot of YouTube videos and I can't tell you how many times I've seen someone represent themselves pro se and they get themselves in all kinds of trouble because they don't know what they're talking about. And even though they have someone who's a standby attorney and they have the ability to take advantage of that person's education, knowledge, do they? No. They're stubborn and they try to go per se and they end up in jail. It's the craziest, craziest thing. But it just goes back to, you know, can you do everything if you want? Yes. Should you? No. There's good reasoning for using professionals. And I feel like a broken record in this regard because I know I've spoken about this several times. And I'm not going to belabor the point. So, again... especially when it comes to your money. You want to get the best advice and guidance. Should you invest on your own? Sure, right? Go ahead. Take 20% of your money and do whatever you want to do with it, right? If you lose 20%, yeah, you might cry, but it's not like losing 100%. Then you're going to cry. Then you're really going to cry, right? And how long is it going to take you to get that money back? A very long time, unless you win the lottery, right? And then you're not even going to win the full shebang. So anyway... That's it. I'm going to leave it at that. I hope that you got something from that. The next podcast I am going to do, however, just to let you know, is going to be on the significant changes that the IRS put out this year. There's a lot of them, a lot, lot, lot of them. And most tax professionals, financial advisors, et cetera, all of them are being trained on what these new changes are because they need to know so that when you see them, You don't have to figure out all this on your own. They should be able to help give you the advice and guidance you need. So there were some significant changes, a lot of things that you need to be aware of. So I'm going to go over and highlight some of these big changes. So be on the lookout for that. That's pretty much it for me today. You have a great day, and I will talk at you later.

SPEAKER_01: 19:10

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