Although Whole Foods is one of my favorite grocery stores, I experienced sticker shock today when I bought fresh fish from Stop n' Shop. Wild flounder at the former recently cost me $14.99 per pound in contrast to $7.99 at the latter. When I asked for comments, I was told that organic status might account for the price difference. Maybe... I will have to check next time I peruse the aisles to assess whether the quality difference helps to explain the $7 gap. Of course there are numerous other reasons that help to explain why something might seem less expensive, assuming that a consumer equates two or more services or products as being equal in quality. A company's distribution efficiency or its ability to buy in bulk are two possibilities. In other situations, it takes a deep drill down to render a meaningful comparison of what one is getting and for how much.

With respect to financial services, pricing continues to gain attention from users, regulators and litigators alike. In a recent investor alert, the Office of Investor Education and Advocacy, part of the U.S. Securities and Exchange Commission ("SEC"), released guidelines about transaction fees such as commissions, markups, sales loads and surrender charges. Ongoing fees such as 401(k) administration charges, annual variable annuity fees and management, 12b-1 and/or distribution fees that are associated with an allocation to mutual funds and exchange-traded funds ("ETF"s) are likewise discussed. The point is further made that fees diminish returns over time. While true and seemingly obvious, "How Fees and Expenses Affect Your Investment Portfolio" reminds readers that time takes its toll. Any costs incurred sooner rather than later worsen the erosion on returns, everything else being equal, over longer periods of time.

Even if fees and expenses are deemed higher, quality differences may justify shelling out more money. Numerous individuals and companies could be willing to pay a premium in exchange for what they decide is important. For example, a plan sponsor could justify the writing of a bigger check to a third party administrator in exchange for 24/7 customer service that will keep its plan participants happy.

In my experience vetting investor performance reports (and teaching the topic in numerous workshops), it is critical to understand what numbers mean and how to parse the data in analyzing whether a vendor is charging a reasonable rate. Moreover, different names can be used to describe the same thing. Conversely, the same words can confuse if they relate to unlike concepts. Understanding the nature of changes, when they occur and the amounts is the goal for any investor, large or small.

The take-away is that fees and expenses matter.