How would you feel having diligently put away your hard-earned money into investments for decades, only to discover that 90% of it had been eaten away by fees? Sadly, this is often the norm more than the exception.
Caitlin and I recently met with a client who had been working with financial advisors for over a decade at a popular wealth management firm (I won’t name them, but it rhymes with “Haymond Lames”). She had just met with her advisors for her annual meeting, where they continuously boasted about the amazing 15% return they had gotten for her this year in their handpicked mutual funds. Imagine her dismay when I informed her that the S&P 500 is up 30% in that same timeframe! The financial advisors at the above firm earn their bonuses based off how many fees and commissions they generate, so where do you think our client’s missing extra 15% return went?
Let’s take a look at how fees eat away at your portfolio over time:
Recently, another one of our clients uncovered a shocking discovery during our coaching sessions: her retirement funds had been allocated by her fund manager into a high-cost 'Gold and Precious Metals' fund with a 5.2% fee! By guiding her to switch to a low-cost index fund with just a 0.03% fee, we helped her avoid losing over 90% of her potential wealth to fees between now and her retirement.
Let’s take a look at two examples showing how fees affect portfolios:
👉 Client One, let’s call her Amelia, invests $10,000 in a low-cost index fund with a 0.05% fee over 40 years.
👉 Client Two, let’s call her Rachel, invests $10,000 with a financial advisor who charges 1% for assets under management (AUM) and places the money in a mutual fund with a 1.5% fee (overall fees = 2.5%).
After 40 years at an 8% rate of return, their balance without fees would be $217,245. Let’s see how they did after paying fees:
Amelia’s fees were only 0.05%, resulting in a portfolio worth $212,942, with just $4303 (2%) lost to fees. 🙌
Rachel’s fees were 2.5%, leading to a portfolio of only $85,133, with $132,112 (61%!) lost to fees. 😭
Rachel lost 61% of her potential wealth to fees. In other words, over half of her potential gains were erased by the 2.5% annual fee over 40 years.
This stark percentage loss illustrates just how critical it is to consider fees when making investment decisions. While the difference between a 0.05% fee and a 2.5% fee might seem small in the short term, over decades the compounded impact can be huge.
In our one-on-one financial coaching sessions - offered through both the Elevate & Invest Coaching Program and the Abundance Circle - we analyze the fees on your current investments to uncover what you're paying and identify strategies to minimize fee erosion.
You’ve worked hard to grow your investments, and we’re here to help ensure your money stays working for YOU, not lost to excessive fees!
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