Would you Give 33% of your Wealth to your Financial Advisor?

Happy Monday, wealthy people! 

When I worked on Wall Street, I typically made more money than my friends outside the industry. It always made me wonder, what on earth is so special about finance jobs, or even myself, that makes them much more well-paying than most nurses, accountants, mechanical engineers, etc.? 🤔

High-paying jobs typically correlate to the underlying business’ profitability. Within Wealth Management, if Financial Advisors charge high fees, then everyone involved in the business is likely well paid. Advisory fees used to be sky-high (even higher than 2%) pre-2000s, but ever since Vanguard popularized the low-cost index funds, fees have been coming down, which I think is a healthy industry restructuring. (Outside the US, fees are still higher).

A 2% advisory fee per year for your portfolio might not seem high, but over, let’s say 20 years, it can cost you 33% of your wealth. Yes, that’s 33%💸! I don’t know about you, but absolutely no service provider (accountant, lawyer, etc.) is worth one-third of my wealth to me.

That’s why at Finance Latte we advocate for financial education. Not just stocks, or day-trading, or crypto. Our Investing Accelerator Course offers a holistic approach to understanding different types of investments (such as stocks, bonds, index funds and active funds) in order to self-manage your long-term investments and grow your wealth. The 10-week on-demand course re-opens in March. Join our waiting list here.

In today’s email:

👉 Stock Market Update - It’s all about Tech Earnings

👉 Would you give 33% of your wealth to an Advisor?

👉 Sip of Learning - Stock Splits

Grab your latte and let’s get started!

– Margarita T., CFA


Would you give 33% of your wealth to a Financial Advisor? 💸💸💸

Assumes 8%* growth (not guaranteed), monthly compounded. Does not take into account taxes, inflation or trading costs.

Financial Advisors typically get paid a percent of your portfolio’s total value. For example, if you owned $100,000 in stocks, and the advisor charged 1% to manage them for you, they would get paid $1000/ year. Doesn’t sound much, right?

Wrong. This seemingly innocuous fee can add up to extraordinary numbers over time.

Let’s pretend you had $100,000 today and wanted to invest it for 20 years. We also assume an 8% annual return* for your investments (not guaranteed).

1) If you managed the money yourself, which means you paid 0% fees to a financial advisor, your money could have grown to $492k after 20 years.

2) If you paid a 0.2% fee to a financial advisor, your money could have grown to $473k.

3) With a 1% fee, your money could have grown only up to $403k.

4) With a 2% fee, your money could have grown only up to $331k. In other words, if you paid a 2% fee, you would have made $161k less ($492k-$331k) compared to what you could have made if you had managed the money yourself and paid 0% fees.

That is a whopping 33% cost of your entire wealth in Advisor Fees!

Is the financial advisor’s service worth it? That’s a discussion for another day (yes, it is coming!), but most likely it is not. Simplistically, it’s too much to pay 33% of your wealth for anything.

If you want to learn how to invest on your own, check out the holistic Investing Accelerator Course to learn the fundamentals of investing with real life, practical examples and to-do lists to get you up and running in 10 weeks.

If you have no time, energy or willingness to invest in your financial skills, another solution would be low-cost robo-advisors 🤖 that typically charge around 0.2% fees. Their name is a bit unfortunate–is it only me who pictures that dancing robot-dog when I read the name robo-advisors? But robo-advisors were a much-needed financial innovation in the industry. When you sign up, you answer a lot of questions about your personal life, preferences and goals, and voilá: the software creates a custom portfolio for you at a low cost of about 0.2% fee. Brilliant. 

*this 8% return is not guaranteed. In the last 30 years, as of December 31, 2023, the MSCI World Index USD (Net), which is a good indicator of global stock markets (and there are many low-cost index funds that track this index), returned a little over 8%. It does NOT account for inflation (which averages 2.2% in Europe and 3% in US over a long term), taxes or other trading expenses. This is not financial advice. Investing involves risk, including loss of principal. Indexes are unmanaged.


🗞️ Article: MIT’s 10 Breakthrough Technologies of 2024.

🗞️ Article: New Hampshire tried to make investing in ESG illegal, with up to 20 years of imprisonment. (ESG = Environmental, Social and Governance).

🎬 Show: Fair Play. A Wall Street thriller where a young woman working at the same asset management firm as her boyfriend, gets promoted over him and her world crumbles...

📚 Book: Quite Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required. An inspiring read of self-made millionaire Kristy Chen, who retired at age 31.


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Finance Latte AB is not a registered investment advisor. This content is for informational purposes only and should not be interpreted as investment or tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment. View our Privacy Policy and Terms of Service.