— Marc Lichtenfeld From “Get Rich with Dividends” page 76
… [assume] you have a $500,000 account, growing 10% per year, after 10 years, you’ve paid over $83,000. Of course, if your advisor is helpful in planning for retirement, your kids’ education, insurance products, asset allocation advice, and the like, and his or her advice makes you an extra $84,000 over that time or enables you to sleep at night, it will be worth paying the yearly management fee.
But if all your broker does is peddle you stock opportunities, stick you in some underperforming or index funds, or execute your ideas, you’re better off investing with a discount broker and keeping those fees for yourself, so they can compound over the years to make you even more money.
Let’s assume that instead of paying over the $83,000 in fees over 10 years, you invested with a discount broker.
Growing at 10% per year, your money would increase to $1,296,871 after 10 years and no fees versus $1,172,867 if you paid your advisor 1% per year. That’s a difference of over $124,000. So it it’s not just the $83,000 you’re paying the advisor; it’s also costing you another $40,000 in profits.
I don’t want to make it sound like I’m totally against financial planners. A good one who helps you achieve your financial goals better than you can do it yourself is worth what you’re paying him or her. But there are many who are merely salespeople who happen to sell financial products. Those people are not worth the fees you pay them. In some cases, they’re not even looking out for your best interests. They’re selling you the products that will land them the largest commissions. Invested wisely, the money that you pay them, in your pocket instead, can add substantially to your returns.”