Why tough market times should prompt investors to take a close look at investment costs

Enough to make any investor nauseated.

The daily ups and downs of the stock market, as inflation pushes the federal authorities to continually raise interest rates, have created a very unpredictable and unpleasant investment environment. We are all wondering: when will this horrible ride end?

Inflation is now at its highest level in 40 years, with an entire generation having never seen such a spike in the cost of basic consumption, from meat to fruit to women’s clothing. World events are not helping matters, as the pandemic in China continues to plague the supply chain, atrocities in Ukraine make daily headlines and there is terrible volatility in energy costs.

Yes, things are not fun.

While it is impossible for us to control these global swings of economic uncertainty, there are small ways to control our personal investments as the market swings like the Buccaneer carousel at the local fair.

Let me explain.

Retirement companies, which administer 401(k), 403(b), 457(b) and other popular plans, are under tremendous pressure to raise fees, despite the fact that account values ​​have fallen for a lot. We could actually see – for the first time in 20 years – fee hikes, with companies arguing that the current inflation rate of 8.5% is perfect justification for charging more money.

Here is part of their reasoning:

• It costs more to run mutual funds with labor shortages and rising wages;
• As a direct result of global supply chain shortages, prices have skyrocketed for technology and equipment serving customers. Many archivists have to consider the higher costs for regular maintenance of the pension plan;
• Insurance premiums for errors and omissions coverage are increasing;
• The costs of mainframe and cloud computing, mobile devices and security technologies have increased.

Unfortunately, I don’t see this trend changing any time soon. I expect higher retirement expenses in 2023 and I can only assume that this will also lead to higher costs for those who participate in these plans and try to save for the last years of their retirement.

But, unlike inflation and global conflicts, I believe that investors have the power to control the fees they pay. This will require homework, with a list of questions for their pension plan administrator. They should understand the underlying cost drivers, request a comprehensive review of investment spending and share class choices, as well as request comprehensive fee disclosures and year-end fund fee reviews .

Additionally, I urge investors to carefully read the documentation shared periodically, which discloses mutual fund record keeping and fee information. As inflationary pressures continue into the third and fourth quarters of 2022, as expected, investors should be prepared for notices of “fee adjustments.”

For investors struggling under what could be an avalanche of paper, I urge them to contact a financial adviser who can cut through the clutter and know exactly what a retirement plan costs. Additionally, the advisor can provide perspective on whether the fees are fair and competitive, or if it’s time to find another company to manage a retirement plan.

It’s at least one way investors can control the unpredictability of the new normal.

Andrew Bluestone is a Certified Financial Planner based in Ramsey.