5 Small Portfolio Fixes That Make a Big Difference: Advisors' Advice

3. Cutting Fund Fees

Having spent 20 years in large wirehouse firms, I was familiar with their line of “active management is better than indexing” and “Vanguard was the devil.” I’m not kidding when I say that there was a disdain for low-cost solutions until that rhetoric could no longer fly and there was a change in tone in the early 2010s.

Nothing showcases this more than in 2013 when a client came to us with a large portion of their sizeable IRA in an S&P 500 fund. Not only was there a sales load, but internal expenses were 30 basis points when it could be had for three basis points. $1 million or 40% of the IRA was in this fund.

The fund originally sold to the client was an A-share BlackRock S&P 500 fund that the client paid a 2% sales load to get into and then 30 basis points [of] internal expenses. Once it came to us, it was just north of $1 million.

The fund was moved to the Vanguard S&P 500 (VOO) ETF at three basis points, which saved the client $2,700 of internal expenses per year just for this one holding.

We were able to make this change and a few others that saved the client thousands of dollars a year for just this simple change, and over 10 years, it’s been much more.

— Jeffrey Smith, managing partner, private wealth advisor, OWL Private Wealth Advisors