Introduction

The Feast
The Feast

Have you ever closely examined your cell phone bill? Typically you just look at the big number at the bottom and write a check. But if you studied it line by line you would see that your bill contains several fees that aren’t going into your actual carrier’s pocket. City telecom tax, state telecom tax, a 9-1-1 service fee… They may seem like small dings here and there, but over time, they add up. These various government entities act as silent partners with your carrier, holding out their hands for their share of the transaction, eating away at your pocketbook.

Just as with your cell phone bill, your investment portfolio is vulnerable to silent partners. Ideally, a silent partner would provide some sort of benefit, but in the case of your investments, these silent partners add no value. There are numerous silent partners that take a bite out of realized and unrealized gains on investments. In the painting, titled The Feast, we depict Uncle Same and several others who eat away at your returns pie. The investing family stand idly in the background looking hungry and perplexed as their wealth is voraciously consumed by many silent partners.

Here is a list of some of the silent partners:

  • The stock broker  or sales agent who earns commissions on stock and bond trades, loads and 12b-1 fees on mutual funds
  • Federal and state income tax agencies that tax realized gains 
  • Active Fund managers who earn an expense ratio while managing a mutual fund
  • Accountants 
  • Firms that charge investment advisory fees 
  • Market makers who earn a bid-ask spread on transactions 
  • Transfer agents who handle share transfers
  • Mutual fund distributors 
  • The brokerage firm that earns commissions and interest on margin accounts and other sources of income on customer assets
Step 7Silent Partnersincome taxAccountantsActive ManagerInvestment Advisory FeeMarket MakersTransactionsTransfer AgentsMutual Fund DistributorsBrokerage Firm