High Fees are bad for investors, but most people miss the main reason why
Many people forget about fees as they are a slow and gradual friction against investment returns. While this will likely weigh heavily on your returns over time, it's a less obvious reason that can be even more costly.
What might that more pernicious stealer of wealth be?
It's common in the industry to have many layers of management and service which almost always adds up to fees of 1% or more. These unnecessarily high costs affect investment advice and force increased risk taking in order to compensate.
When the markets are doing well, the increased levels of risk aren't always obvious. However, when significant price declines inevitably occur, that added risk becomes painfully obvious. Unfortunately for many investors that increased risk costs them far more than the elevated fee likely ever will.
It is because of this inherent conflict that we've kept our fees at WealthFactor to .35% up to $10 million in assets and .10% on assets over $10 million.
Planning and process go a long way in removing our sometimes unfortunate and ill-advised human instincts. The probability of achieving successful investing outcomes can be dramatically improved by reducing costs, which naturally reduces the pressure to take risk.
Tired of the same generic, unsustainable approach to investment advice? Call me for a complimentary, no sales risk review so you know exactly where you stand.
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