How do you determine whether my external accounts have high, medium, or low fees?

Understanding and managing the fees in your external accounts is very important because they can directly and significantly impact your long-term overall wealth. Here’s why.

Our fee calculation covers two kinds of fees—the expense ratio of funds, and the advisory fee that might be paid to manage those funds. We determine the expense ratio for mutual funds and ETFs based on the ticker you hold and our external data source of fund expenses. The advisory fee can be optionally entered by clicking “Settings” from the menu and then “Connected Accounts”. There, you’ll see an option to “Edit” each connected account. You may also pay one-time load fees on mutual funds (at purchase or sale), or commissions on trades, but our calculation doesn’t consider these since these were typically already paid.

Advisory fees are considered high if greater than 0.5% for most accounts. Employer plans like 401(k)s may have additional fees due to record-keeping and plan administration costs, so for employer plans, advisory fees are considered high if greater than 0.6%.

Funds are considered to have high fees if their expense ratio is not in the lowest 10% of fund expense ratios compared to funds with similar geographic exposure. To calculate the high fee threshold, we look across the universe of investable ETFs and mutual funds in the US with at least $100 million in assets. We group funds with mostly U.S. holdings together and funds with mostly international holdings together. We then identify the 10th percentile expense ratio for each of these groups. If a fund cannot be categorized by geographic holdings, we use the 10% percentile expense ratio across all funds.

High fee thresholds:

  • Funds that contain over 90% U.S. market exposure: 0.30%
  • Funds that contain over 90% international market exposure: 0.42%
  • Funds that do not fall into either of the two above categories: 0.35%

If fund fees, as a percentage of the account balance, are less than or equal to 0.25%, fees are considered low. If fees are between 0.25 and 0.5% they are considered moderate. Above 0.5% is considered high.

If either your advisory fees or fund fees are high, your “Total Fees per Year” will be shown as “high” on your External Accounts page.