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Save by unbundling money management fees
Business
Published in 22-1-2015
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[...] you buy financial products that cost at least 1 percent a year by themselves. [...] to avoid commissions, you pay a "wrap" fee of about 1 percent to have the personal attention of a financial adviser. Wall Street gets all the interest and dividend income your money generates. The figures that follow, based on hourly fees of $100 to $200 an hour for professional time, translate into nice annual salaries. I mean, really, just how complicated are the big financial decisions in the lives of most people? [...] once you step away from the fee-ridden world of the major brokerage houses and insurance companies, you can step away from high active-management fees. Today, many independent registered investment advisers offer low-cost index fund portfolios. [...] if you separate asset management from financial planning, you can determine how much financial planning advice you need in any given year. The increasing use of life-cycle mutual funds in 401(k) plans has introduced millions of retirement savers to the idea of lower-cost, one-decision investing. When they charge 2 percent a year on our money, they earn far more than a good CPA does. [...] they charge more in one year than it costs to manage a simple low-cost portfolio for a decade.