Paying 1% fees costs them $860,000

Meet Jeff and Susan, who just realized they were about to pay $860,000 in fees Can't view this email properly? [View in Browser]() [Podcast Newsletter Header Final.png]() {NAME}, Meet [Jeff and Susan](), who just realized they were about to pay $860,000 in fees alone to their financial advisor. Podcast - Jeff and Susan Susan and Jeff when they learned they were about to pay $800,000+ to a financial advisor in fees Now let me show you the math, which is shocking and totally counterintuitive. --------------------------------------------------------------- Thank you to our sponsor, who makes this newsletter possible: Get affordable, accessible financial planning through a flat fee membership with Facet. [They’ll deposit $500 into your brokerage account]() when you invest $5k within your first 90 days. --------------------------------------------------------------- The surprising math behind paying 1% to a financial advisor Most people using a financial advisor have no idea how much they’re actually paying. That’s exactly how Wall Street wants it, because the math is not intuitive. - A 1% fee means 28% of your lifetime returns can go to fees. That’s because the 1% applies to your growing portfolio every year. - A 2% means over half of your returns go to fees - And there are back-end fees, high expense ratios, and other ways that you can be charged without even realizing it Some people genuinely need the help of a financial advisor. For example, if you have a complex financial situation, a large portfolio, or you just want a second set of eyes on your investment plan, you might decide to hire a financial advisor. I hired one myself to double-check my asset allocation. But pay a flat fee or hourly rate—never a % of your assets. Would you pay a % of your assets to someone for mowing your lawn? Of course not. How to find out how much your advisor is charging you If you ask someone at Ace Hardware how much a screwdriver costs, they’ll point you to a clear sign. But financial advisors are rarely as open with their fees. Recently I was helping one of my [Money Coaching]() coaching students on his finances. He said, “I have a financial advisor…but I’m not sure if I actually need them anymore…” I asked: “How much do they charge?” He didn’t know (most people don’t), so I asked him to email his advisor. Look at this!!! Financial advisor fees “.25% per quarter” — that’s 1% per year! It drives me crazy how crafty they get with the wording to make the fees seem so insignificant. This tiny little exchange would have cost him hundreds of thousands of dollars in his lifetime—more than all the coffee he’d ever buy, combined. Financial advisor fees Love having to drag a simple answer out of my financial advisor with pliers ABOUT THE AMOUNT I’M ACTUALLY PAYING HIM How much will I end up paying in fees? Let’s imagine you’re 30 years old and you have $50,000 invested with a financial advisor who charges a 1% fee. For easy math, let’s also imagine you automatically contribute $1,000 / month to your investment account (learn more about automation in Chapter 5 of [my book]()). Assuming a 7% return (again, find out why 7% in my book), how much will you have in 35 years, at age 65? Investment calculator Investment fee calculator [here]() The answer: you’ll have $2.146 million. But if you pay a financial advisor 1% per year, you’ll only have $1.764 million. Ramit's Money Tips That 1% fee equals more than $381,000 in fees going into your advisor’s pocket. THREE HUNDRED AND EIGHTY ONE THOUSAND DOLLARS IN FEES. DO YOU UNDERSTAND HOW ABSURD THAT IS? And if you pay an advisor 2%? That’s over $757,000 in fees. So how do you fix this? First, decide where you’re going to go You have 2 choices: - First, you can do it yourself. Move your investments to a low cost brokerage like Vanguard, Schwab, or Fidelity. I show you how to do this in Chapter 7 in my book. - Second, get a financial advisor who charges a flat fee—not a percentage of your assets. You can find one at [napfa.org]() or check out our amazing sponsor, [Facet]() who offers financial planning through a flat fee membership. Check out their special deal for IWT readers above. With fee-based advisors like Facet, your fee remains the same as your investments grow. So when you make more, you keep more. Next, break up with your financial advisor Once you’ve selected your new brokerage, you’re going to tell your advisor that you’d like to do an “in-kind” transfer I recommend doing this in writing, because they will do everything in their power to try to make you stay! Here’s a simple email script I gave Jeff and Susan: Dear John, I wanted to let you know that I’ve decided to move my accounts. I’d like your help in doing an in-kind transfer to my new account. What paperwork is required? Thanks for your service, [Your Name] You will probably get a lot of panicked phone calls. If you do, you can write: I prefer to stick to email. Nothing personal, but I’ve decided to make a change because the fees that I’m paying are not part of my financial goals. Remember: I don’t mind paying premium prices for great products and services. I pay a lot for travel, clothes and convenience. I don’t even mind hiring a financial advisor if you need a second set of eyes. But why would I pay a % of my portfolio when I can get amazing service for a flat fee? I hope this was eye opening. Out of curiosity, what surprised you about this email? Write back and let me know. [Signature] P.S. This week on the podcast: “We have $285k in debt. Can we achieve financial freedom in 5 years?” (Part 1) Check out Part 1 of my [surprising conversation]() with Trin and Lucas about how their complicated financial system is keeping them stuck. [Podcast]() [Programs]() [Podcast]() [Netflix show]() [Books]() [Website]() [IG]() [in]() [X]() [YT]() Was this forwarded to you? [Sign up here](). [Unsubscribe here](. 548 Market St #89946 San Francisco, CA 94104-5401