CAPITAL LIFE
by Chelsey Southern
In recent years the birth of the flat fee financial planner has disrupted the financial planning marketplace. Learn the ...
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Albert Einstein claimed that compound interest is the eighth wonder of the world. Unfortunately, unless you are a mathematician or an actuary, the effect of compounded percentage fees on rising and fluctuating investment values is extremely difficult to calculate. That could be precisely why it was dreamt up by the investment industry, to begin with. You want your investment return to compound and grow over time. But you don’t want your fees to do the same. Breaking the link means that the gap between your returns and the fee paid widens over time. All to your advantage. Which is what you want.
In most walks of life, if you want more, you pay more. This applies to anything from upgrades to your new car to an extra side dish with your restaurant meal. Wealth management doesn't (currently) work like that. This is why Capital broke the link. Imagine investing £1 million and being charged 1% of the value (£10,000 a year). Assume that your investment portfolio doubles over 10 years. Your portfolio is now worth £2 million, and the 1% fee is £20,000 a year. The service stays the same, but you now pay double (£20,000 a year). Does that make sense or feel fair to you? We don't think so.
Use our calculator to see the effect of percentage charges on your own portfolio. Enter your investment portfolio value and the investing time period. The calculator assumes the same rate of annual return. The financial difference is directly related to the time period. The money-gap is not based on future investment returns (because these are yet unknown). The gap grows based on known fundamentals: facts and evidence. The results may surprise you. They can also empower you. If the advantage is there, why not take it? A free lunch doesn’t always come along. See the calculator below:
Don’t throw your hard-earned money away or leave your future to chance.
Instead of fancy sales brochures or marketing hype, base your decisions on hard facts and solid evidence.
Investing your money in the long-term is vitally important for you and your family. You can’t roll back time and start again - it’s too important to get wrong. You don’t get a second chance.
Put the power of compounding returns and time to your advantage, and bin the compounding charges that are eating your wealth.
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