Waze founder leads fund investors out of fee traffic jams

First came the robo-advisors offering to manage money for a little as 25 basis points. Now, fee-mongers take note: Here comes FeeX, the self-proclaimed “Robin Hood of Fees.” The upstart taps the wisdom of the crowds to help investors compare how much they are paying for the mutual funds  in their 401(k) or 403(b) accounts. The FeeX Sucker Meter will let investors know how much they’re paying relative to their peers.

Founder Uri Geller is no lightweight. He was the co-founder of Waze, the mobile app that crowdsources traffic and offers alternative routes. He launched Waze in 2008 and sold it to Google for $1.3 billion in 2013. His new venture, FeeX  aims to ensure that investors are aware of the amount of  mutual fund fees deducted directly from their fund balances.

Here’s an except from his  humorous blog post  about his mutual fund wrap account:

Eventually I figured it out: “EXP RATIO” stands for expense ratio.  It’s a percentage that’s deducted from my return each year, and get this: it’s not shown on my statement! This particular fund had an expense ratio of 1.65%.  This means that if I have an average balance of $10,000 for the year, the annual fee will be $165.  I checked the other funds, and they had expense ratios ranging from about 1.3% to 1.75%.   Most unbelievable of all was that these fees were IN ADDITION TO the 1.5% that Johnny was charging me.

“Johnny, am I right to understand that you’re charging me 1.5% each year to put me in a series of mutual funds that are each charging me another 1.5% or so on average?  Isn’t that double dipping?”

“Well, uh, Uri, that’s not really the way I would look at it.”

                  “I Can Loose Money On My Own”  FeeX.com September 17, 2013

If you’re an advisor who has been less than candid with clients as to the amount of mutual fund fees that they’re actually paying — be warned: the Game Over sign is flashing!

As a financial advisor recruiter, I find advisors to be very sensitive to how much their  clients are paying in fees.  After the crash,  many advisors abandoned poorly performing SMA’s because they were upset that their  clients were paying  quarterly fees for  accounts that were underwater. Most advisors want to  deliver good performance to clients  at the lowest possible cost. That’s  been one of the drivers behind the explosive growth of ETF usage by advisors in the last few years. Client fee schedules are part and parcel of virtually every recruiting conversation with a prospective firm of which I’ve been a part. Advisors need to be assured that clients won’t pay higher fees at new firms.

Enhanced transparency in pricing is good for the advisory business.  It rewards those advisors who are choosing reasonably priced products for clients and who are providing value.  Clients are encouraged to seek them out and to place more assets with them. Moreover, full disclosure in client fees is here to stay. It’s no accident that  just last week,  FINRA  proposed rules for non traded REIT’s  that would enable clients to see the value of their holdings for the first time,after the broker’s commission has been deducted.

Whether all advisors are ultimately  governed by a uniform fiduciary standard or not, it’s clear that full  transparency on fees  is  part of the advisor’s duty to act in the client’s best interests.  Both are  key ingredients of the  regulatory framework now and going forward.

About Mark Elzweig

I am an executive search recruiter with an inside track on financial advisors, the asset management industry, and Wall Street. My work has appeared in numerous publications including On Wall Street,AdvisorOne, and Fund Fire. Journalists regularly seek me out, so you catch my bon mots in The Wall Street Journal, Research Magazine, Reuters, and more. You can follow me on Twitter @elzweig or you can reach me directly at 212-685-7070 or elzweig@elzweig.com.
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One Response to Waze founder leads fund investors out of fee traffic jams

  1. Transparency and providing great value to clients is key.

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