Vampires don't exist. At least, not in the Dracula or True Blood sense. Those types of vampires are fictional creatures.
But. Figuratively speaking, vampires are all around us.
This might not be charitable to say, but some people are "energy vampires" - spending time with them makes you feel like the life has been sucked out of you.
And in the world of business there are money vampires.
These are the people and organisations who are more focused on value extraction than value creation.
This is evident everywhere, but I am personally most sensitive to this in the world of professional services.
It's absolutely true that we should pay for products and services that give us value.
And I'm not advocating for spending the bare minimum when it comes to professional services. Quite often, my response to whether something is expensive is "Yes - but it's worth it".
This is true in many cases, but not all of them.
When it comes to money, it's very easy to pay more in fees than you should be.
Frankly, money is boring. Most of us don't want to spend our time looking through disclosure documents, policy statements and investment reports. There are more interesting and fun things we'd rather be doing.
Financial products are often hard to compare on an apples-to-apples basis. There are all sorts of technical differences between them. Sometimes these distinctions are important, and sometimes they aren't.
This creates a perfect opportunity for money vampires to suck you dry.
Examples abound. For instance, let's imagine you have $100,000 to invest in a managed investment scheme. Paying 0.5% more in fees per year might not sound like a lot. But compound that over 10 years, and it's over $5,000. For a portfolio of $1 million, that's over $50,000.
For most of my clients, I can justify my fees by showing how much money I can save them in investment fees. These savings usually far exceed my fees, especially when you compound them over time. For many clients, I also point out that while their level of insurance cover may have been appropriate at one point in time, they are currently paying more in premiums than they need to be.
Losing money to unnecessary fees is a type of death by a thousand cuts. Each cut leaves you with a little less than you should have. The collective result is that over time, you and your loved ones will be worse off financially.
Part of Fairhaven Wealth's underlying ethos is to ensure that clients don't pay more in fees than they need to. This extends beyond product and service fees, to the way that Fairhaven Wealth actually charges its clients. For more information, check out www.fairhavenwealth.co.nz
Related articles from the blog:
- Fees are important. I'm in the process of saving some clients over $5,000 per year
- Bonus Bonds: a great way to make money - for ANZ, not consumers
- Excessive fees - "a tax on smart people who don't realise their propensity for doing stupid things"
- "Fees never sleep." - Warren Buffett's bet.