According to various independent studies, the aggregate fees paid by individuals for investment advice ranges between 2% – 2.5% of investable assets. With long term historic gross returns falling in the area of 7-9%, this suggests that an individual will experience a 25% reduction in expected return just from advisory fees. These fees can represent half of the amount that is typically taken for living expenses annually, reducing the chance that one’s assets can maintain purchasing power after the impact of inflation. Compounding this issue is the fact that the average money manager underperforms the market.
Accordingly, there is a significant chance that the advice offered is less than optimal, making the targeted long term expected returns of 7-9% an optimistic outcome.