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Article Title:
How to Pay Less and get More: Discount Broker vs Professional Management Fees

Article Description:
How do you invest? What do you really pay? At the end of the day, 
what are your real results? These are questions smart investors 
should be asking themselves (but usually don't).

Additional Article Information:
626 Words; formatted to 65 Characters per Line
Distribution Date and Time: Tue Mar 28 02:50:19 EST 2006

Written By:     Ulli G. Niemann
Copyright:      2006
Contact Email:  mailto:[EMAIL PROTECTED]

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How to Pay Less and get More: Discount Broker vs Professional Management Fees
Copyright © 2006 Ulli G. Niemann
Successful Investment

How do you invest? What do you really pay? At the end of the day, 
what are your real results? These are questions smart investors 
should be asking themselves (but usually don't). In this era of 
more fees, misc. charges, holding periods and back end 
redemptions, even at discount brokers, how are you really making 

Working with a new client brought this all to my attention. I 
know what I found may not apply to everyone; however it will 
apply to many and very likely apply to you.

I need to preface this by saying that, unlike the majority of 
registered investment advisors, I have built my practice over the 
past 15 years by dealing with "small" investors. Many of them are 
first timers because my minimum account size is only $5,000.

I targeted this group because I enjoy the educational part of my 
business. A happy side benefit has been that by providing million 
dollar service to these so called "small" investors, they 
naturally refer me to parents, relatives, friends and business 
associates, often with considerably more assets than the original 
client. What a happy consequence.

Having set the stage, here's what happened with my new client who 
we will call John. John was 26, newly married with a one year old 
son. His wife was taking care of the child and John had a good 
full time job. After selling his house in California and moving 
to Florida he had $6,000 left for starting a long-term investment 

Though he had been reading my newsletter for about a year, John 
decided to manage his 401k on his own. It was a noble effort but 
provided less than desirable results.

He then attempted to set up a brokerage account at a major 
discount broker. With his $6,000 he was told that the quarterly 
fee would be $45, and, of course, if he sold any mutual fund 
within the first 180 days, there would be an early redemption 

$45 per quarter would be equal to an annual fee of 3% of his 
starting balance. John called me somewhat frustrated and said 
that he'd be willing to set up an account with me, but how would 
it make sense if in addition he'd have to pay my advisory 
management fee?

That was a good question because it certainly doesn't make sense 
to have an account in any type of market environment and pay 
about 6% in fixed annual fees.

However, what John didn't know was that if you have an account 
with a registered investment advisor who is affiliated with 
custodial broker, the fee structure changes.

What did that mean to him? It meant that I opened the account for 
him as a new client. He now has no annual fees, other than my 
management fee, and his 180 day holding period for mutual funds 
is reduced to 90 days, minimizing, if not eliminating, the 
likelihood of an early redemption fee.

The net result was that he would receive the benefit of my 
experience—which he already trusted based on my track record of 
pulling clients out of the market in October 2000—and it would 
cost him no more, and likely less, than his discount brokerage 

Needless to say, John was very relieved. In essence, he traded 
broker garbage fees for professional management at no additional 
cost to him.

And, since he itemizes his deductions on his tax return, all fees 
paid are tax deductible, which is just an added bonus to factor 
into the equation.

It turned out to be an all around win-win situation for John. I 
encourage you to review your situation and see if what looks like 
a discount in fees is actually costing you a premium.

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing 
about objective, methodical approaches to investing for over 
10 years. He eluded the bear market of 2000 and has helped 
countless people make better investment decisions. To find 
out more about his approach and his FREE Newsletter, please 



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