Recently, a nice gentleman – let’s call him John – reached out to me to express a discontent with his current financial adviser, but yet he didn’t know exactly why he was frustrated. After asking a few probing questions, I learned that John suspected that his adviser purchased mutual funds having high expenses. While he didn’t have the tools to analyze mutual fund fees, John had a hunch – call it intuition. John was wondering if he was paying too much.

If you own a mutual fund, you pay an annual fee (expense ratio) to the investment company offering you opportunity to invest in its mutual funds. The fee exists so that the company can provide you the service and make a profit. Interestingly, the largest mutual fund company in the U.S., The Vanguard Group, is organized so that investors also own the company, thus, Vanguard doesn’t increase mutual fund fees to make a profit. The company can keep fees at rock bottom, with several mutual funds having an annual fee of 0.10 percent. In contrast, the average mutual fund expense ratio is approximately 1.25 percent.

Some investment companies tack on other fees, too, such as front-end and rear-end loads. You should be aware of another fee called the 12b-1 fee, which is pulled from investors’ funds annually for investment companies to use to attract new investors or compensate brokers. This is not a one-time fee.