It's never too early to start planning for a kid's financial future. (Heck, considering the way tuition costs keep rising, it can feel like we're all behind.) But as one Motley Fool Answers listener discovered, acting in haste as you set up your child's investment accounts can mean getting tripped up in the mire of excessive fees.

In this segment of the podcast, host Alison Southwick is joined by senior analyst Jason Moser and Motley Fool Wealth Management's Ross Anderson to discuss Uniform Gifts to Minors accounts, A-share mutual funds, C-share funds, 12b-1 fees, 529 accounts, and warning signs that it might be time to reassess your relationship with your financial advisor.

A full transcript follows the video.

This video was recorded on Nov. 27, 2018.

Alison Southwick: The last question comes from Kevin. "I have a three-month-old and opened her an UGMA account -- American Funds through my FA the day we got her Social Security number." Oh, that's nice. "I have a biweekly draw going into the account and I thought this was a smart idea until about two months ago in, I'm realizing the fund we're in charges 5% of any amount added to the account.

"Example -- when my $100 goes in, $5 is automatically taken out and this is in addition to the fee of 1.14%. I've also learned that there aren't really any tax advantages and it could even hurt her financial aid status when applying for college. I know about 529 plans, but I don't want these funds restricted to only education. My question: Is the fee structure typical of an UTMA? Why shouldn't I just open a separate investment account in my name, with much lower fees, and give it to her or use for her when she's old enough?"

Ross Anderson: The acronym we're talking about, here, is the Uniform Gifts to Minors account or a Uniform Transfers to Minors Account. UGMA and UTMA. People use those pretty interchangeably a lot, so I actually like that he asked the question that way. They are technically different with what you open but they're largely going to have the same structure. Is this fee structure typical? No! This is not based on the type of account you've heard of.

What you're buying right now, and the reason that you're paying 5% is what you said up at the top, which is American Funds through your financial advisor. You are buying what's called an A Share mutual fund. That is building a sales charge. That is how your financial advisor is getting paid on selling you those funds. That has nothing to do with the structure of the account or the fact it is a transfer into her name.

If you opened that account with any low-cost broker [a Schwab (NYSE: SCHW), a Fidelity, an Ameritrade (NASDAQ: AMTD), an E*Trade (NASDAQ: ETFC)], you're not going to have that same thing, but you're also going to be on your own for making those investment choices. If you wanted to buy individual stocks or low-cost index funds, ETFs, you can absolutely do that in those accounts, but you're going to be taking more and more of that responsibility for managing the funds vs. having the financial advisor provide that to you.

Southwick: Is that 5% called a load? Is this different than a load or is this a load?

Anderson: Yes, this is a sales charge. There's a couple of different versions of it. Like a "C-share" fund doesn't have the big upfront charge, but has a much higher ongoing operating expense, because they're going to pay that advisor 1% a year instead of the 5% upfront. So most of the time on an A-Share fund, he's getting 5% upfront and then a trail of 25 basis points, which is in there as a 12b-1 fee.

Southwick: Oh, we love 12b-1 fees. Those are marketing fees which is bananas to me. I'm literally spitting. It's so bananas to me that someone at a mutual fund company was like, "You know what? We're going to call it a 12b-1 fee and we're going to make our investors pay for us to market the fund."

Anderson: But it's really not a marketing fee. It's going to the advisor. The marketing is the advisor that sold it.

Southwick: Well, it's still stupid.

Jason Moser: If I can chime in here for just one additional thought. I'm fully onboard that these fees are absurd, but I've had some experience in this realm [I have two younger daughters who are 12 and 13 now]. We opened up 529s for them when they were born and at around six or seven years old, we opened up individual brokerage accounts for them. They were with Scottrade. Scottrade was recently acquired by TD Ameritrade, so now we're all with TD Ameritrade.

The fact is they have UTMA accounts with TD Ameritrade [each individually] that function just like savings accounts. I guess they technically have savings accounts somewhere but we don't really use them. Instead we put all of this money into their brokerage accounts, and a couple of times a year we'll buy a new stock for their portfolios.

Now, these brokerage accounts are not 529s. They're not tied to anything other than just like an UTMA savings, which does mean, as the listener mentioned, that could [not necessarily will] but could affect their qualifications for student loans down the road. Now, my perspective on that is that we have a system in place that has a million different ways students can get financing for school. That is plainly obviously based on the $1.5 trillion of debt that is outstanding today.

I'm not going to worry about $5,000 to $7,000 that they've accumulated in savings via investing. I'm not worried about that potentially offsetting any financial aid questions. I would rather they have the lifelong lesson of how powerful investing is. Let's cross that student loan bridge when we come to it. I'm certain we can cross it. I never even considered that as a factor in making the decision to open those accounts for those girls.

Southwick: What does Kevin do? Go back to his financial advisor and say, "What the heck, buddy? Get me out of that!"

Anderson: Honestly, I would take this as an opportunity to review what you are paying and for what across the board with your financial advisor relationship. Not to say that paying fees or paying an advisor for advice is bad, but you should understand what you're paying and why. This is clearly an example of maybe you didn't understand how you were paying for that advisor's services.

The other thing I'll go back to just a little bit is that he mentioned just open an investment account in my name and give it to her later. That's totally fine. It remains on your books. It remains your asset. I think if you're going to keep it in a separate bucket, that's fine, but with these UTMA accounts, you are transferring legal ownership at the age of majority, which is either going to be 18 or 21 in most states. That is unrestricted access to that money. On that birthday, if the kid says, "Give me all that money, Mr. Advisor or Mr. Brokerage House," they have to.

Southwick: Kevin, raise your kids right!

Anderson: You're talking about a three-month-old and you have no understanding at this point of whether or not that is a financially astute three-month-old and I don't think there is a way to make that judgment.

Moser: You keep them listening to Motley Fool Answers.

Southwick: There you go!

Moser: They can be pretty funny, too, Ross. I think that's safe to assume.

Anderson: My baseline is as an optimist. I hope that they are a very financially responsible student, but I know plenty of folks [probably myself included at 18] that shouldn't have been handed a big pot of money. So be careful with the UTMA because it's going to grow, hopefully, and it could be significant.

Ross Anderson is an employee of Motley Fool Wealth Management, a separate, sister company of The Motley Fool, LLC. The information provided is intended to be educational only, and should not be construed as individualized advice. The Motley Fool has a disclosure policy.