The phrase "everything is negotiable" may not be true when it comes to the fees investors pay on their investments. Some of the expenses are in fact etched in stone. However, there are a few fees you can get lowered. That’s particularly important because any money that goes to fees is less money invested. (Read more, here: Investing 101: The Concept Of Compounding.)

When it comes to investment fees how much you are going to be able to negotiate away is going to depend on your level of investable assets. An individual who has a lot of money with say an IRA, mutual fund or in an actively managed stock account is going to have more leeway than someone with a few bucks invested. For instance, some financial firms will cut or eliminate the fees altogether if clients maintain a specific account balance. While others won’t do anything unless you speak up. Either way, before you begin negotiating you have to do some due diligence.  

Know Your Fees Before Negotiating

To successfully negotiate lower fees you first have to understand what you are being charged. The most common fee investors look at is the expense ratio or the total costs to put together and operate the fund. If a mutual fund has an expense ratio of .70% that would mean for every $1,000 you invested around $7 would go to your operating costs each year. The higher the expense ratio, the more you pay in fees. The expense ratio isn’t something that is normally negotiable but knowing the expense ratio compared to other similar funds could be used as leverage for other fees. Let’s say the expense ratio is a little higher than a similar fund from a competitor. You may not get a lower expense ratio, but you could get another fee waived. (Read more, here: Pay Attention To Your Fund’s Expense Ratio.)

Investment Management Fees Can Be Lowered

One area where you do have more room to negotiate is investment management or advisory fees. These are the fees charged as a percentage of your total investable assets. If the fee is 1%, that would mean you would pay $1.00 for every $1,000 invested. Management fees can vary from one investment firm to the next and can be a lot higher than 1%. If you are staring at an investment management fee that is high, it behooves you to speak up about lowering it.

Another fee that can eat up your investments but is negotiable is the transaction fee your brokerage or investment firm charges you to make trades. Lots of firms charge you each time you buy or sell shares in stocks, mutual fund, ETFs and other investment products. The fees may not be high, but they can quickly add up if you do a lot of trades.

Some mutual funds are front-end loaded, which means they charge an upfront fee known as a load or commission. You can avoid that fee by choosing a fund that has no-load, but you can also try to negotiate the commission down if you still have your heart set on investing in the fund. (Read more, here: Investment Fees: How to Understand and Manage Them.)

Make Sure Your Reasons For a Lower Fees Are Sound

Before you can ask, your investment firm to lower the fees, you have to make an apples to apples comparison. After all, you may think you are paying too much, but if the same fees are being charged for similar investment types, you may not be successful in getting it reduced. It’s also a good idea to look at the performance of your investments. If you are making significant money on your investments then, it’s going to be hard to come up with arguments why your fees should be lower. But on the flip side if you are overpaying in fees and your investments are underperforming then you are negotiating from a place of strength.

At the end of the day if your investment firm isn’t willing to budge, then it may be time to look for low-cost alternatives. There are a ton of passive mutual funds, index funds and ETFs that aren’t going to have overly costly expense ratios, and there are a lot of online discount brokers that don’t charge you a lot every time you make a trade. But to find those funds you have to be your homework.

The Bottom Line

Investment fees are a necessary evil, but they don’t have to eat away at all of your investment gains. While some investment fees are set in stone there other areas where there is room to negotiate. To be successful, you need to know how much you are paying and whether or not you are getting anything in return for it.

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