Financial Investment Case Study

727 Words2 Pages

Issue: Retirement is something that most people work their entire lives to achieve. Hard earned money is taken from each paycheck and deposited into a retirement account that will hopefully grow into a considerable amount. The world of financial investing can be very confusing and leads most people to trust others in managing their money. This beckons an important question: whom do I trust with my future financial livelihood? The answer to this question could be the difference between a comfortable retirement and the need to continue working. Broker dealers are the most common type of financial advisors because of their cheap management fees. They have many names including wealth manager, investment consultant, and financial advisor. “The …show more content…

Financial investors often push investments with higher fees even though there are similar products with lower fees. This is a conflict of interest because they make more money off the ignorance of investors. The fees could only be one percent higher, but in longer term investing that is a considerable difference. For example, a $10,000 investment with an annualized 7% return over twenty years will net $7,300 more with a .4% expense ratio as compared to a 1.5% expense ratio …show more content…

Fiduciary’s cost around 1 percent of a portfolios net asset value annually, while non-fiduciary’s cost as little as .05 percent (Carosa). While the price is significantly higher, the benefits that come with it out weigh the cost. Peace of mind in knowing an advisor legally has to act in their clients best interest is a wonderful thing. Although non-fiduciary’s annual management fees are less, investors still end up paying more in hidden fees and subpar investments.
Conclusion:
Requiring broker dealers to follow a fiduciary standard would be very beneficial for investors. It would definitely allow investors to choose the best financial options available to them. They wouldn’t have to worry about their advisor having alternative motives. They would also have a more dynamic investment strategy that changes with their changing needs. It will take a lot of legislative push to accomplish a standard fiduciary policy, but I foresee it happening in the very near

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