No. of Recommendations: 8
Many people don't realize that the financial services industry operates on a business model that assumes they'll extract 2% per year in fees, expenses and costs from their customers. (Prudential is actually among that elite cadre of firms that manages to take a bit more than 2% from their clients.) Losing 2% per year, every year to an insurance agent and the company he represents has a profound affect on your ability to amass any wealth.

The article doesn't say if her brother was doing this for her and taking a commission, so you are making an assumption there. However, even if that were true, it does seem to me that she had more than enough money to fund her lifestyle and was happy with that. It also seems to me that she either wasn't interested or didn't have the knowledge or whatever such that she preferred to let someone else manage her investments, with or without a fee.

Over a 60-year investment horizon (30 years saving for retirement, 30 years in retirement) an advisor taking 2.00% per year will capture 2/3 of your wealth vs. a low-cost index fund portfolio with 0.10% in annual fees and expenses.

I do have a financial planner, and he does take a percentage, but he takes 1%, which is half of the rate you are quoting. I am perfectly willing and able to pay that fee and still end up with enough money to do what I want. I really only need enough, as anything beyond that will be excess. Yes, I realize I could do something with that excess in terms of leaving it to my heirs or charity or whatever, but that's not on my priority list.

And the other side of that coin is that I might also not get at least the net results of my financial planner by doing it all myself, so if I am doing as well or better with my planner than I could do by myself, it is OK for me to be paying for that service.

Not everyone has the interest or knowledge to manage their own finances, and so they hire someone to do that. Similarly, I know people who hire plumbers and electricians and roofers to do things around their house when they could probably do a lot of that themselves and save the money.

But it is not always about the money, and in the case of these twins, it seemed to have worked well for them. Sometimes, people are actually happy with having enough, and prefer to do something else with their time than just manage their money. And if that means that someone else also gets to earn a living along the way helping them to manage their money, that is OK as well.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.