By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (59) | May 1, 2009 | Investment Performance

How would you feel if one of your mutual fund investments lost 50% of your assets, then raised your fees to offset its reduced revenues?  In most industries, higher fees reward positive results, but not the mutual fund industry.

According to Martin Jewel, Associated Press, many funds are boosting expense ratios that determine investor fees.  The increases are corroborated by Jeff Tjornehoj at Lipper, who said:  “raising mutual fund fees is like rubbing salt in a wound.” 

Jewell went on to say, “funds most likely to boost expenses are those that attracted lots of investors earlier this decade, but have since seen assets plunge more sharply than the broader market.”

How do the funds get away with it?  Funds that produced solid results in 2003 to 2007 believe they can raise fees because their investors made money during those years even though the gains evaporated in late 2007, 2008 and early 2009.  They are betting memories of positive results will cause clients to stay invested with them and pay fee increases that are deducted from their accounts.

If you don’t want to pay higher fees for bad results then your only recourse is to change fund managers.  But, how do you know the new fund managers will be any better?  You can check their track records, but the fine print says past performance is no indicator of future results.  If you are like most investors, you are confused to the point you stay put and accept the fee increases.  The fund families know this about you.  Maybe you should surprise them by moving your assets to a fund family that hasn’t raised its fees.