credit card companies and financial institutions are becoming smarter
about protecting people’s personal information online, credit card
fraud and identity theft are still very real threats.
And as more
consumers move to paying for purchases with digital wallet solutions
like Apple Pay and Google Wallet, they’ll need to weigh the
convenience of storing personal financial information on their phones
against the possible danger of data security breaches.
Karen Ellenbecker, founder of Ellenbecker Investment Group, older
consumers are more likely to be concerned about hackers than their
people tend to question the safety of online financial
transactions," says Ellenbecker. "They want to know how they’re
being protected. Younger people, on the other hand, think credit card
fraud is just a natural course of doing business in the cyber
card fraud and identity theft dropped 21 percent in 2013, according to
the Federal Trade Commission, data security breaches at major
retailers like Target and Home Depot have made consumers question how
safe their personal information and financial data are when making
purchases with credit or debit cards.
beginning to adopt more secure payment processing systems that encrypt
consumers’ personal and financial information when they check out,
but the changeover has been slow. However, there are steps consumers
can take to protect themselves, says Betty Wellhoefer Hill of
Crescendo Wealth Management. Common fraud protection practices
monitoring bank accounts and credit card accounts online to spot any
abnormal charges or transactions.
personal information online. Make a habit of clearing your logins and
passwords and consider changing them monthly.
credit report. You’re entitled to three free credit reports per
year. Request one every four months from the three major credit
bureaus (Equifax, Experian and Transunion) to identify unusual
activity like credit cards and bank accounts that you didn’t open.
give out financial account information over the phone unless you
placed the call and know the business to be reputable.
unusual for potential clients to tell Michael Sadoff of Sadoff
Investment Management that they can’t afford to pay the firm’s
annual 1 percent asset-based fee. Yet when Sadoff asks those same
perspective investors how much they’re currently paying in fees,
they usually can’t answer. And frequently it turns out investors are
paying 2 percent or more in hidden fees.
often have no idea of the fees they’re paying," says Sadoff.
"They either don’t see, don’t understand or don’t pay
attention to how much they’re paying."
In fact, studies
consistently show that over half of investors aren’t aware how much
they actually pay in fees. But understanding those fees is important
because they can start to eat away at your investments over time.
may seem small, but over time they can have a major impact on your
investment portfolio," says Brion Collins of Lake Country Wealth
Management in Delafield.
If an investment
is generating 8 percent in annual returns, but you’re paying 2
percent in hidden fees, your investment performance drops to 6
percent. And though 2 percent may not seem like much, year after year
those hidden costs add up, reducing your portfolio value by thousands
clients with investment portfolios in the millions, that cost is
magnified even more," says Sadoff.
So what are some
of the most common hidden investment fees people have no idea they’re
paying? Operating costs or expense ratios, sales loads or commissions
paid to brokers, account maintenance fees charged on an annual or
quarterly basis, and investment management fees are just a few of the
hidden costs investors routinely pay.
control excessive fees by taking a do-it-yourself approach, building
and managing their own investment portfolios. For those who prefer a
little more hand-holding, Collins advises choosing an investment
professional who’s a fiduciary — a financial adviser who by law is
required to act in the best interests of his or her clients.
advisers until you find someone you trust and feel comfortable
with," says Sadoff.
investment performance is another way to monitor the progress of your
investments and identify hidden costs that may be sabotaging your
investors are becoming more fee conscious, some are willing to justify
those costs if their investment portfolios are performing well.
investors are seeing returns in the double digits, they figure they
must be doing well," says Sadoff.