In my travels and conversations with savers all over the country, I’ve been asking two questions lately that are quite revealing.
“What is the total cost of fees, commissions, account charges, loads, and other charges you pay for the saving and investment accounts you own?”
I tend to get one of two replies. Either the person has no earthly idea; or they think they know, but have no earthly idea (401k plan participants often insist they pay nothing).
The second question is almost unfair given the answer to the first – but worth asking anyway.
“Whatever you pay, what do you get for your money?”
With due respect to my audiences, I’ve never gotten a coherent answer to this one. To be fair, it is nearly impossible to answer. We never know whether we get any extra benefit by employing a financial advisor, mutual fund manager, broker, or other so-called expert – because we can’t know by comparison – how good (or bad) we might have done on our own.
I wanted to find out what the real impact of investing fees is. So I invented a hypothetical investor saving $10,000 a year and growing it at 8% for 30 years? If our investor incurred no fees at all, in 30 years, they would have:
Let that sink in a minute – the 30 year cost could easily top a half a million dollars. Worse still – the meter is still running. Thirty years may represent the accumulation phase of our life, but the distribution phase (retirement) can last another 30 years. The math is exponential – meaning that figure can more than double over a lifetime.
The experts think we pay on average, between 1.5% and 3.5%. Can we ever get it to zero? Probably not – but most of us can get a lot closer to zero than we are now if we just consider our options.
But most of us don’t. I call it the ‘sales tax syndrome.’ When it’s time to buy a new pair of jeans, we don’t make a buying decision based on the buck or two of sales tax that will be added to the price tag – we buy jeans based on how they make us feel or how comfortably they fit.
Those fees are like sales tax in the investing world – they seem insignificant, but they make a huge difference. There are ways to get very good wealth-building advice ‘wholesale’ than the retail path you may be on. Let us show you how.