Many people will happily pay 1% advisor fees, never realizing the fees will quietly add up to $300,000+ over their lifetime...
...but they will instantly reject the idea of paying $500/hour for a great tutor, coach, or lawyer
Why do you think this is?
...but they will instantly reject the idea of paying $500/hour for a great tutor, coach, or lawyer
Why do you think this is?
I call these PHANTOM COSTS. They’re the invisible costs that add huge — and invisible — costs to your purchase.
If people truly understood these fees, they would be outraged. If they eliminated them, they could spend *extravagantly* on things they wanted, even paying $1,000/hour for amazing advisors & still have $X00,000+ left over. But this requires sophistication
Some nuances of fees:
-Nothing wrong with paying for value, even paying a LOT for premium value (e.g., $1,000/hr lawyer)
-There is something wrong when fees are engineered to obscure their true cost (ahem, Wall Street)
-MOST PEOPLE DON’T ACTUALLY WANT TO KNOW WHAT THEY’RE PAYING!
-Nothing wrong with paying for value, even paying a LOT for premium value (e.g., $1,000/hr lawyer)
-There is something wrong when fees are engineered to obscure their true cost (ahem, Wall Street)
-MOST PEOPLE DON’T ACTUALLY WANT TO KNOW WHAT THEY’RE PAYING!
We already know people find it difficult to understand the power of compounding. But this isn’t just for compound interest--it’s also compounding fees. The “drag” is non-linear & extremely counterintuitive. A 1% fee doesn’t sound like a lot until one day, when it adds up to a LOT
In short: Humans don't understand the devastating effect of phantom costs (esp. compounding ones), which can be unimaginably large over their lifetimes. Instead, they agonize over tiny expenses like $3 coffee. Get educated.
