What difference can management fees and commissions make?

What if this blog was worth $500,000 in your retirement account? Oh, the difference 1% makes…

When I talk to people about the fees in their retirement and investment accounts, I often get a shrug, or something mumbled about how “everyone has to make a living.”

That’s an expensive shrug people. In money, there is nothing more important than the dollars and cents, but people often avoid or talk their way around what I am saying because money is an inherently emotional thing.

It’s stressful, relationships are involved, and frankly, some people would rather pay more than deal with any number of emotions (can I trust my guy, did I make a bad decision, do I feel guilty, can I trust this guy sitting across from me…?)

How do I know this? I had your friendly neighborhood financial advisor for over 20 years. Make no mistake, I truly liked “my guy.” I was a police officer with his son-in-law for half a decade, he was a genuinely good person.

But. The numbers, they matter. When I meet with prospective clients they are typically paying over 1% in a management fee AND their advisor has them invested in other funds with a cumulative additional 1% of fees.

But what difference can 1% make, and how can I almost always know I can, generally, cut their fees in half.
Per a Nerdwallet.com article, a 1% additional fee can mean an additional $533,000 in a retirement account after 40 years.

Is $33,000 a lot? How about HALF A MILLION! (plus that $33,000) Look at your investment statement. Now picture yourself in retirement with an extra $500,000 added to whatever that number is.

Now, that is all things being equal, which is rarely ever the case.

But how can I confidently say that I generally reduce fees by 1%. Open any investment statement and you will see a basket of “well diversified” (don’t get me started) mutual funds, from big Wall St funds. I can probably tell you the tickers in your portfolio sitting here typing this now.

Even if you like your current performance, you probably have some S&P 500 indexed mutual fund. Your fund company is probably charging you .65% for the privilege. Simply by moving to a fund (that holds the exact same securities) that carries a .04% (basically free, which some mutual fund carriers are talking about going to) we can eliminate .65% net of fees.

If you also read the blog about commissions and fees you will see there is even more of your hard earned money at stake, and choosing the right advisor can mean a big deal to your future plans.