A Costly Mistake: Watching The Bottom Line of Your Finances
THE BIG THING I WANT YOU TO KNOW:
If you’re only monitoring the bottom line of your investments you could easily be paying too much in fees and losing money.
When you get your investment statement, what do you look at to measure if it is doing well?
Are you guilty of looking at the bottom line of your investments? Probably so, or you know someone who is, that’s the blog title. Watching your investment’s bottom line is dangerous.
Bottom line watching could mask the high fees you’re paying!
I was getting my haircut the other day and the gentleman next to me struck up a conversation. He of course asked what I did and we got to talking about finance, naturally, and he said that he’s paying 1.5% on fees for money management.
I told him that’s crazy because the standard is 1%, but he said, “I don’t really care if I’m paying 50% more in fees than I should, because the bottom line is that it’s growing.”
And you sir are the inspiration of this conversation!
Be sure to check the fees you’re paying.
News flash: we’re in the longest bull market in history, everyone’s bottom line looks good!
If your dog, fish, or I dare say cat was your financial planner, your money would’ve grown significantly in the last ten years. Why? Because the market has been growing so much that it would take actual work to lose a lot of money in this market!
So only trusting your bottom line these day, means you could be ignoring some extra costs because your “number” is going up. For example, Mr. Haircut reminds us that…
You should never be paying more than 1% for money management.
There is ZERO REASON for an advisor to charge you more than 1% — regardless of how nice they are or the relationship you have with them. So I explain this to him, but he keeps coming back to “the bottom line.”
Here’s what frustrated me the most about this gentleman’s situation.
He was using a large bank for investment services (I can’t tell you which one, but it happens to rhyme with Tells Margo) and this bank has a breakpoint, which basically means if you invest more money with them you get charged a lower fee. So he told his advisor that he’s definitely reached that break point, to which his advisor responded:
“Yes, you have enough money with us overall above this breakpoint, but we can’t count…”
…here it comes…
”that annuity that you purchased.”
….okay, I understand if maybe you’re not banging your fists on the table like I am, but let me explain why this is such a big deal.
This gentleman purchased a $700,000 ($700,000!!!!) annuity from this advisor, who received a pretty hefty commission from it. The rest of his money after that commission was in “managed funds”, which he is charged a fee on, and those funds are what count towards this breakpoint that he needs to meet. The advisor told him the annuity can’t count towards it because he wasn’t charged a fee on it.
He absolutely was charged a fee, it’s called a commission — and it was huge! That advisor made more on this gentleman’s annuity than probably all of his managed funds in the last five years!
if your advisor is willing to say “you bought this thing through us, but we’re not going to include it in your assets and drop your overall fee because it’s not officially ‘managed funds’ — you should not be with them.
Don’t walk, run! Sprint in the opposite direction!
Here’s The Bottom Line:
There Are So Many Places That Will Manage Your Money. Don’t Overpay or Be Taken Advantage of Because You See Growth.
DO NOT give your time and money to a financial bank or planning firm like that ^. That’s ridiculous, and it happens constantly!
If the market is up, then even if you’re being charged an insane amount for managing money, you still would’ve seen amazing growth. And you would’ve thought, “This is great!” because you only saw the bottom-line going up, but you have to look at the fine print. This really comes into play with the market is down, because instead of losing 10% you could be losing 11 or 12% when that fee is added. Over time, that’s a massive amount of money!
When you come into our office, in our first meeting you’ll find out every. single. way that we get paid, because you deserve to know.
Please, friends, look past the bottom line and read the fine print. Don’t settle when it comes to your money — you need to find a place that’s going to treat you fairly and not overcharge you and STILL give you exceptional service. You deserve that, it’s YOUR money!
Do you know the fee you’re paying your planner? It’s worth the call.