U.S. Dept. of Labor Video Featuring Scott Puritz
Rebalance is a national registered investment advisory firm that is dedicated to providing consumers at all income levels with superior, low-cost, high-quality, endowment style portfolios for long-term growth. Rebalance does act as a fiduciary, as a registered investment advisor, and our firm always puts our clients front and center in a way that is transparent and conflict-free.
Approximately one third of Rebalance’s clients come to the firm having had a “suboptimal” relationship with a stock broker. Frequently, it is an account that was inherited from a family member or a neighbor. What we see with these “brokerage refugees,” over and over again, is a complete lack of awareness that their stock broker is not a fiduciary and, equally as important, that there is almost always a second level of fees at the fund investment management level that are very considerable. The clients that have come to Rebalance from stock brokerage relationships have been paying an average of 2.3% per year and that can eat up to one-third to one-half of their retirement return. When we transition “brokerage refugees” onto the Rebalance platform, on average we reduce their fees by 68%. At the same time, we provide them with low-cost, high-quality, globally diversified portfolios, disciplined rebalancing, and a two-person retirement investment team that is dedicated to them.
The vast majority of time, these clients are totally unaware that the person sitting across from them, who they thought was a trusted advisor, is a commissioned salesperson. Most of the time, they are unaware that their stock broker is not a fiduciary, but that his or hers economic incentives is to sell financial products. We recently did a survey of our client base and found that 83% are oblivious to the fact that they were subjected to a second level of fees at the fund level.
Albert Einstein is reported to have said that financial compounding is one of the most powerful forces in all of nature. That certainly is true, particularly if it is working on the side of a retirement investor. But compounding is a double-edged sword, because fees also compound, and that extra 1% fee burden, which does not seem like a big deal in terms of unnecessary fees, will compound over time. For a retirement saver going out 20 to 30 years, it can eat up to one-third to one-half of their retirement return, which is a very significant difference.
What is the dirtiest four-letter word in all of finance? Only…… Only 1%…. It’s only 1%. And, when compared to tipping, for example 10%, 15% …. if you’re generous, 20%….. 1% seems small. But fees and investment costs compound just the way investment returns compound.