It’s March, 1981: I’m a college senior following my beloved Indiana Hoosiers to Philadelphia for the final four…without a ticket, of course.
Seeing a group of cabbies selling tickets curbside, I approach. A guy who would make Leroy Brown look stunted and mal-nourished – gets out of the cab and bellows, “follow me.”
I obey – and he starts doing what I had been doing for an hour – walking through the crowd yelling, “who has tickets?” When I told my new friend that I didn’t need him to do that – he turned to me with a menacing scowl, declaring himself my “agent.”
Too afraid to debate the matter – my agent found me tickets for which I paid an extra $50 fee for his “agency service.”
What’s the point of the story?
We “pay” brokers, financial advisors, and various other titled “agents” to guide our investments. But exactly how much do we pay them – and exactly what do we get for our money?
In my ticket-buying story – I paid exactly – $50. I’m not sure what I got for my money – its likely I would have found the same tickets on my own and saved the $50 – that was a lot of beer-money back then?
In the investing world – we can’t answer either question. According to money research firm Demos, a typical investor will pay more than $155,000 in fees and commissions over the accumulation phase of their life – and the meter keeps running until death. And it’s impossible to know how much value that advice yielded. We’ve all seen monkeys throw darts at a newspaper stock listing and beat the experts. Could we have done as well – or almost as well on our own?
Investing fees and Commission are the largest lifetime expenditure we’ll incur that most of us can neither quantify (tell how much we spent) nor qualify (tell – in dollar terms – what value we got for that expenditure). Could you?
Maybe an alternative would be to choose a wealth-building path where the fees and commissions are known and certain – and can be refunded – so their impact is neutralized.
Don’t know of such an animal? I do!