08.20.19
Cost to Play Bigger Role in Investment Recommendations
by: Greg Iacurci
Cost will soon play a more important role in the investment recommendations brokers make to clients. The SEC, as part of its recent overhaul of investment-advice standards, explicitly stated that broker-dealers must weigh cost when making a recommendation to a retail client; many experts believe brokerage firms will have to adapt their systems and processes to account for the new standard. Partly in response to investor demand, investment firms have substantially reduced fund costs. The average expense ratio for an actively managed equity mutual fund dropped to 0.76 percent in 2018, compared with 1.06 percent in 2000. Similarly, the average cost of an index equity fund fell to 0.08 percent from 0.027 percent over the same time period, according to ICI.
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