Advisers charge one of two ways. They charge commissions on each investment they sell you, or they charge a fee, which can be an hourly rate or a percentage of your total account each year. Sales loads on mutual funds can be charged upfront when you invest, or deferred until you sell. Load funds also offer steady-load shares, typically called C shares, that collect a smaller commission annually. Investors should be alert to all of the fees they might pay.
Mutual funds charge annual fees even if they charge a sales load.
Morningstar Inc. said the average upfront sales load for A shares of U.S. stock funds is 5 percent of the amount invested in the fund. These funds annually charge an additional 1.35 percent of your balance in the account. B and C class shares typically have higher annual fees. An adviser might charge 1 percent to 1.5 percent of your money each year to put and keep you in the right mix of mutual funds. Be sure to include the annual fees the funds charge, because that essentially comes out of your pocket, too.