Most people don’t realise that a seemingly small fee of just 1% on your investments can result in you losing more than 20% of your balance over 40 years, and that a 1.5% fee can result in you being deprived of around 30% of your investment over the same time!?
I was absolutely shocked when I discovered this fact. This meant that all those managed funds, everyone’s investments including their superannuation could potentially be missing a huge chunk of change over the long term.
And the worst thing about this? Most people will never even know or realise.
The compounding effect of fees is a non intuitive concept that the human brain finds hard to grasp, so how could consumers be made aware of this problem? They need to glimpse their financial future and be scared into action, a bit like Ebenezer Scrooge and the Ghost of Christmas Yet to Come.
A simple calculator can forecast the effect of fees, an online tool available to everyone. The calculator would do all the hard work of working out the compounding effect of an investment and the difference the fees make to the final balance, all that is needed is for the user to enter their balance, contributions, expected rate of return and of course fees and the calculator would do the rest.
Hence the Fee Cost Calculator was born. This calculator features on spoonfedinvestor.com to illustrate the problem of high fees on your total return. More recently I created a specialised version of this aimed at the Australian superannuation market. These calculators are now relatively easy setup on your website and are fully integrated so no more customers disappearing off to MoneySmart.gov.au.
Recently the Grattan Institute found that Aussie’s are paying triple the fees of other OECD countries for their retirement and this calculator clearly shows what a devastating effect unnecessary fees can have on retirees down under.
Without tools such as this how can the average person be expected to know they are effectively being ripped off?
Want to save your customers thousands or even hundreds of thousands? Install our Fee Cost Calculator on your site, and empower your customers to see the true effect fees are having on their life savings before it’s too late.
Peter Barber, MoneyWeapons
