This week a conversation I had with a prospective client stuck with me and I thought I’d share. After looking at his self-directed custodian’s fee statement for last year, he realized an investment he had that went south (highly speculative real estate development), was being charged custodial fees for the highest value rather than the value it is today.

When he reached out and asked the custodian, he was told that he could re-evaluate, but the FEE for that would be greater than the savings (which was substantial).

Warren Buffet has been a crusader against the fees of Wall Street for years and in this year’s letter to shareholders, said this:

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”

So, my message is, that if you have a self-directed IRA or for that matter, an IRA that is charged a percentage of value, find out what that percentage is and when it’s calculated. If you are holding a commodity that can change daily, are you being charged the high or low value for the day or month? Are you being charged a flat fee for management and then a fee for gains? Your real return is profit NET of Fees.

The simple solution is to always have a custodian of your accounts that charges a flat rate and can be easily calculated. This is the only way to be sure you know your real rate of return.