Fees you could expect to pay regularly
There are two sources of fees you traditionally get charged when an investment advisor is managing your money:
- Fees from the investment advisor themselves who build your portfolio and keep it balanced
- Fees charged by the mutual funds and ETFs in your portfolio itself.
Let’s break down both, explore what you would pay at Carbon Collective, and compare them to other places you could invest your savings.
Investment management
We charge: 0.20% of your portfolio value (AUM) annually, plus a $25/year membership fee
Investment advisors typically charge you a fixed percentage of the total you’ve invested with them each year. These fees compensate them for their work in building and maintaining your investment portfolios. The finance term for this total invested is “Assets Under Management” or AUM.
Typically, investment advisors charge 1.00% of AUM, but they also include financial planning services. Such firms are great for folks with larger amounts of money and complicated finances (taxes, etc.).
In the early 2010’s Betterment, Wealthfront, and a series of other online-only “robo-advisors” cut out the financial planning services. In doing so, they made it a lot cheaper to get automated, professional investment management. Their typical management fee is 0.25% of AUM.
We believe you shouldn’t have to pay more to invest with your values, so we structured our fees to be comparable to the industry standard (0.20% of AUM).
We charge a $25/year membership fee to Carbon Collective that covers the account management fees we get charged from our online broker, Altruist. The $25/year allows us to have low account minimums.
Let’s walk through a couple examples: If your portfolio at Carbon Collective was valued at $10,000, you could expect to pay Carbon Collective $20 (0.20%) + $25 (annual membership fee) = $45/year (0.45% of $10,000).
If your portfolio at Carbon Collective was valued at $50,000, you could expect to pay Carbon Collective $100 (0.20%) + $25 (annual membership fee) = $125/year (0.25% of $50,000). Note that both of these do not include the fund expense ratios, just the investment advisor management fee.
Fund fees (expense ratios)
Fund Fees in Carbon Collective Portfolios: 0.08% – 0.11%
Mutual funds and ETFs are a great option for long-term individual investors because they do all of the hard work of picking and managing stocks and bonds for you. All you need to do is buy shares in the fund itself.
The companies that make and manage mutual funds and ETFs get their revenue from charging an annual fee (usually called an expense ratio) that gets deducted from the share price of the fund itself. These fees tend to be more hidden than what you pay for investment management, and if you’re not careful, they can really add up.
Mutual funds in particular can have very high fund fees. Calvert is one of the largest creators of ethically-focused mutual funds. Calvert’s standard equity mutual fund charges 1.74%/year. Yikes!
We, therefore, only use ETFs or Exchange Traded Funds. ETFs tend to have much lower fees and generally lower tax burdens as the fund managers buy and sell stocks and bonds with the fund far less frequently.
There are some solid, climate-focused ETFs out there, but they tend to have high management fees (0.46%+). We think you shouldn’t pay more to invest with your values and the ETFs we’ve selected for our portfolios reflect that.
Depending on the split between stocks and bonds in your account, you can expect to pay 0.08% – 0.11% in fund management fees with a Carbon Collective portfolio.
To put that in context, the average fund fees in a Betterment SRI account (their more ethical portfolio) is between 0.15% -0.21%. Wealthfront does not offer an ethical investment option. Their average fund fee is 0.08%.
Fees you only pay when transferring money
There are no fees for ACH transfers to and from your investment accounts. That said, our brokerage software does charge for outgoing wire transfers and checks. If you elect to transfer funds using either of those methods, we pass on the fees to you. Additionally, you will be charged for returned transfer requests if you entered the information incorrectly:
- ACH transfer: $0
- Returned ACH (per return) – $30
- Paper/e-check: $5
- Outgoing wire (US): $25
- Returned Checks/Wires and Recalls (including amendment repairs) – $30
- Outgoing wire (Intl): $45
One more fee to lookout for. Brokerages often charge fees when transferring an IRA. If you transfer an IRA from an outside brokerage (Schwab, Fidelity, etc.), you can expect they will charge you a transfer fee. The average is around $75. In the industry, this is called an ACAT fee.
If you decide to transfer an IRA you have with Carbon Collective to someone else, our brokerage (Altruist.com) company will charge you an ACAT fee of $75.
