Why fees can change your life – Inves.io

A very bold statement, yes. It boils down to whether you believe money could have a important effect on your life. Most, I believe, can see money having an effect on their life in one form or another.

Fees cost pensioners £284,000+*
Really this is true. If you pay 2.5% fees, like most people do, if not more you are throwing away money that could be used to keep you in your retirement. Some could consider it immoral that an industry is built with almost exclusively salesmen whose sole incentive is to sell, sell and sell more. This is because these salesmen get a large chunk of that fee. It is easily possible to use index funds and pay significantly less (1%) for investments that, more often than not beat the performance of “experts”, who are just guessers. The lucky guessers are the ones who make the money. When they make bad guesses with your money, you pay them 2.5% of your entire investment for doing so, it doesn’t affect them much at all. It is all very clever and quite wrong.

One large asset management company has an army of “Partners” throughout the country. “Partner” is simply a marketing term they use instead of “Sales Rep”. Their whole business is built on selling high cost investments that bring in large bonuses and commissions. These fees potentially cost their clients £100,000s more than better alternatives on the internet and even provided for a much smaller fee by an IFA.

*Based on a 20 year old paying £200 per month into an investment for 50 years with an average rate of growth at 7% and paying 2.5% fees compared to 1% fees (these are even the lowest you could have).

So can investment fees change your life. Only if you believe £200,000 would change your life.

Drawing the Battle lines – Investment Sins

Cardinal sins of investing:

Not beating the market

When investing for your future, you have two options. Active or Passive management. Active management (a fund manager making decisions on your investments) is supported by Wall Street firms, banks, insurance companies who – you guessed it – charge the fees and therefore have a vested interest in charging you for their “expertise”. Lots of large financial institutions charge up to 3% of the whole value of your investment per annum just for selling you that “expertise” and paying the expert’s bonuses. And you know what? Active management (most of the time) does not beat a computer!

Passive management is backed up by scientific research by university academics and private research houses. It is a proven method of gaining returns that track the market and saving oneself from the silly facts of behavioural investment. Passive investment is usually performed by a computer tracking a set market, such as the FTSE 100 (the top 100 companies in the UK). Indeed investing passively can increase gains by as much as 2.1% over active management and charges you a lot less for the privilege. That is something the big banks won’t tell you!

Don’t put up with financial advisors and large investment companies charging you massive fees for “experts” managing your money. At best it isn’t good value and at worst it is a systematic scam with a smile. Don’t commit an investment sin. Save for your future not theirs.

More sins to follow.