Cost isn’t everything – but it does help!
When we think about the costs of financial advice and wealth management, it’s important we consider value. “What is the value of the service I’m getting for the price I’m paying?” Ultimately, if you're getting good value for money, then the cost is worth paying and is an integral part of any good investment service.
With that said, costs do have a considerable effect on returns over a long period of time.
Our clients understand why they are invested in the stock market – even the smallest increases in investment returns, once compounded over many years, can have a truly dramatic effect on an investor’s total wealth.
Take an investment of £100,000 after 10 years:
- Growing at 3% a year = £134,935
- Growing at 5% a year = £164,701
- Growing at 7% a year = £200,966
Try it out for yourself with our savings calculator here.
By extension, fees work in much the same way. Any costs you pay have to be made up with additional investment growth. Heavy fees reduce investment growth, which reduces the amount of compounding – the magic that helps your money grow.
It’s significant then, that The Times recently featured an article on the total costs of wealth managers in the UK. They did this by looking at the reduction in investment growth due to fees, when investing £100,000 for 10 years.
It makes for some illuminating reading and has revealed some eye-watering costs.
Across those surveyed, total costs averaged 2.8% a year, with some as high 3.8% a year.
‘And Octopus Wealth?’ You ask. … a refreshing 1.8% a year.
On £100,000 that’s a saving of up to £2,000 in fees every year, although in truth our clients typically have significantly more invested than that so it follows that their savings are often a good deal higher.
Not sure if you're getting good value for money from your current wealth manager? Click here to book a call with one of our partners to find out.