OXFORD, Miss. The mutual fund fee bill is in the mail. And it should include the hidden costs of mutual funds, which are so significant that in some cases they are several times greater than the funds stated expense ratio.
That was the consensus from the majority of panelists on The Mutual Fund Summit here Saturday, where 11 lawmakers, regulators and industry leaders, including
The debate over mutual fund fees has become almost as heated as the debate over taxes, said summit panelist Don Phillips, managing director of
"If everyones charging an unreasonable amount, they all look reasonable," added Barbara Roper, director of investor protection,
Zero Alpha Report
Meanwhile, in a Friday teleconference, Zero Alpha revealed that hidden costs stem from trading costs both from brokerage commissions and implicit bid-ask spreads.
"The study shows that for the typical fund, portfolio transaction costs, [including] commissions and spread costs, equal 43% of the funds expense ratio. That means for every dollar you know you spend on fund costs, another 43 cents is hidden from you," Bullard said.
"Even more shocking is that in many cases, portfolio transaction costs can be 400% or more of the expense ratio. In other words, for every dollar you pay, four dollars or more is not disclosed," Bullard continued.
Jeff Buckner, president of high-net-worth registered investment advisor
Moderating the session Friday for Zero Alpha, a nationwide network of eight independent investment advisory firms, were Edward O'Neal, assistant professor of finance at the
Commenting on how important it is for fund companies to share the right, the honest fee figures with shareholders, Bullard commented: "An ounce of data can be worth a pound of policy."