A strong income can easily mask structural financial flaws. Based on real portfolio reviews, these are the six biggest places successful people are losing ground.
I was astonished to see the fee schedule that the husband of my wife’s friend signed up to when he shifted his portfolio to a wealth manager (up front load on funds, back end load on withdrawals, an annual recurring AUM fee, etc).
He is an educated man who holds a senior position in the oil and gas industry, but I just could not get him comfortable with the notion of a self-directed investment program.
Deep down, I wonder if people tolerate the high fees to give themselves an element of protection in the event that their portfolio experiences losses?
It may be convenient to have a third party to blame in the event of poor performance, rather than being 100% responsible for negative outcomes.
Exactly. You’re so right that’s it seems to be mostly pyschology that leads people to paying AUM for those kinds of reasons. You’re friend is a perfect example.
It let’s people offload the responsibility. It lets people not worry about day to day market changes when they can assume someone else is on top of it. Not to mention that successful people have internalized the idea that high quality services cost more than low quality. That mindset makes it nearly impossible to believe that free DIY investment management can be better than white glove prices.
At the end of the day it could be costing them $1M+, often without realizing it. There’s so much else we could use that money to live a fulfilling life, which is the real tragedy!
I was astonished to see the fee schedule that the husband of my wife’s friend signed up to when he shifted his portfolio to a wealth manager (up front load on funds, back end load on withdrawals, an annual recurring AUM fee, etc).
He is an educated man who holds a senior position in the oil and gas industry, but I just could not get him comfortable with the notion of a self-directed investment program.
Deep down, I wonder if people tolerate the high fees to give themselves an element of protection in the event that their portfolio experiences losses?
It may be convenient to have a third party to blame in the event of poor performance, rather than being 100% responsible for negative outcomes.
Exactly. You’re so right that’s it seems to be mostly pyschology that leads people to paying AUM for those kinds of reasons. You’re friend is a perfect example.
It let’s people offload the responsibility. It lets people not worry about day to day market changes when they can assume someone else is on top of it. Not to mention that successful people have internalized the idea that high quality services cost more than low quality. That mindset makes it nearly impossible to believe that free DIY investment management can be better than white glove prices.
At the end of the day it could be costing them $1M+, often without realizing it. There’s so much else we could use that money to live a fulfilling life, which is the real tragedy!