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  • Poterack Capital Advisory

Fiduciary Approach to Investment Fees & Expenses

Updated: Aug 30, 2023

An investment fiduciary is an individual or entity that has a legal and ethical duty to act in the best interests of another party (client) when making investment decisions on their behalf.

Investments have fees, expenses, and/or liquidity limitations. It is human natureto want everything we want and not want what we don’t want. Beyond understanding a family’s objectives, comfort level with risk, values, etc., a Fiduciary ultimately has to select various investments and strategies aligned with those objectives, etc.

When I research the universe of investments available to our independent firm, there are many tens of thousands. The internal investment fees and expenses vary greatly. This raises a question I want you to consider; Am I acting in your best interests if my investment research is entirely in pursuit of the lowest cost investments?

Is this how you approach buying products and services? Do you simply look for the cheapest car, home, doctor, furniture, and on and on? You must be acting in your own best interest, correct? I ask you to accept my premise that lowest cost, in and of itself, is not in your best interest. If two quality choices (product or service) are equal except one choice has less cost, then of course none of us want to pay more for no additional value.

Value! This is what matters and what leads me in my fiduciary duty. Regardless of investment internal fees and expenses, me and my firm do not receive any ofthose fees and expenses. As a fiduciary, we are compensated based on your investment account values, not on transactions or commissions. Therefore, we are on the same side of the table as our clients. If an investment choice in your portfolio has higher expenses, it is because I believe you are receiving more value than a less expensive investment choice.

If this expected value does not materialize, you and I both lose. If this expected value does materialize, we both win. A fiduciary does not have a conflict of interest regarding investment choice, regardless of fees and expenses. Want to learn more? Reach out to our firm to schedule a conversation!

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