Financial Advisor Costs
Annual Percentage Fees
Financial advisors are not as cheap as you think
Learning to manage your own money can literally save you hundreds of thousands of dollars over a lifetime of saving and investing. When you learn how basic the investments are that your financial advisor is putting your money in and how little they actively do with it day to day, it almost seems like a scam that they end up with such a large cut of your assets. You can easily learn how to invest your own money in boring index funds, and retire with a much larger balance. Below is a hypothetical scenario comparing using a financial advisor versus investing your own money in identical index funds.
Scenario:
You are 20 years old. You heard about something called a "Roth IRA" retirement account. You decide you are going to put $7,000/year into this account. You are paying an advisor between 1.5-2% total for their services, and they put your money into a standard mix of diversified "index funds".
After 40 years you are ready to retire. Following this plan and based on historical averages, here is approximately how much you'd have investing in those same funds yourself compared to a financial advisor doing it for you:
Self-managed
$2,920,000
Advisor (1.5%)
$2,140,000
Advisor (2%)
$1,940,000
That's 25-35% of your end balance, not 1.5% like most people think it will be, and all your financial advisor did was choose basic and boring index funds for you anyways.
When I met my now wife, she was paying a 1.25% annual account balance fee, and her advisor had her money invested in index funds that ranged anywhere from another 0.5-1% annual fee, making her average annual cost about 2%. It doesn't sound like a lot, but it adds up over the decades through the power of compounding. Now she manages her own account, is invested in almost identical funds, and she is only paying an annual grand total of about 0.05% to invest in nearly identical funds.
Your financial advisor is not taking risks with your money nor do they have any secret investments that do better. Most active traders have a hard time "beating the market", meaning investing in index funds is rarely overcome by other trading activities that people think their financial advisors are doing for them.
You can learn to do this on your own, and I can teach you how and what it all means. It is remarkably simple to mimic what a financial advisor does for you.
Contact me to begin your new financial future
Matt Wenger
Bozeman, Montana