What are Layered Fees?
Layered fees are management fees, typically in investment products, that investors pay to financial managers for the same group of assets.
How Do Layered Fees Work?
Many mutual funds, annuities and investment advisors charge layered fees. Let's say John Doe is a financial advisor, and his standard fees include the cost of trading domestic stocks. However, Jane Smith wants John to make various trades of Japanese stocks in her portfolio. John has a layered fee structure, so he charges Jane extra for these transactions.
Why Do Layered Fees Matter?
Layered fees are often duplicative, but the prospectuses for these investments and client agreements (when an advisor is involved) must disclose them to investors.