This free lunch is being eaten every day... by investment advisors and brokers.

Lamborghini Aventador

2018 Lamborghini Aventador S Coupe

In my first post in this series, The Tyranny of High Fees, I examined the confiscatory nature of high advisory fees.  In short, a one-percent incremental fee will reduce an investor’s terminal asset value by about one-third over thirty years. For ultra-high net worth (“UHNW”) investors, this could amount to hundreds

of millions of dollars.  Minimizing fees should be part of every investor's financial planning. Achieving the Free Lunch Finance theory tells us there is no free lunch on Wall Street.  While generally true, there is a free lunch available to almost all UHNW investors:  lowering fees.  Currently, this free…

Individual investor underperformance is typically caused by conflicted and/or bad advice.

individual investors

Individual investors about to get picked off.

Individual investors realized investor returns are awful.  The reasons start with poor financial planning and work outward from there. Spinning Gold into Straw Every year, Dalbar studies the realized returns of investors in equity and fixed income mutual funds.  Every year they find the same thing:  investors

dramatically underperform the benchmarks, across every time-period, from 12 months to 30 years.[1] For example, over the 30-year period ending December 31, 2015, equity mutual fund investors received, on average, an annualized return of 3.66 percent.  Over the same time-period the benchmark index returned an annualized 10.35 percent.[2] These investors realized about 35…

"Performance comes, performance goes.  Fees never falter." - Warren Buffett[1]

Warren Buffett

Warren Buffett

While many clients gripe about attorney fees, attorneys should themselves be focused on reducing asset management fees.  This blog post begins a series examining the negative effects of high fees and how fee reduction should be a cornerstone of financial planning. Most Ultra High Net Worth (“UHNW”) investors pay

their advisor(s) an asset management fee between 75 and 100 basis points, in addition to the underlying expense ratios of the investment vehicles used, such as separate accounts, mutual funds, and exchange-traded products.  For an investor with $10 million in assets under management (“AUM”), these fees typically total to 1.25 to…

Multiple brokers, investment advisors, and product vendors, all hostile to each other and fighting a land war for the client's assets.

Map of former Yugoslavia.

Map of former Yugoslavia.

Many of our clients have what I call the "typical Balkanized attorney portfolio" that makes it difficult to manage.  Frequently, they use multiple brokers and investment managers, in addition to having direct investments in hedge, venture, and private equity funds. This results in a monthly deluge of statements and confirms

that can easily aggregate to hundreds of pages. Balkanized Investment Management Most people are aware of the term "Balkanization", which means to break up into smaller parts. In the political context, where a country disintegrates into smaller factions, Balkanization is malignant because the groups are hostile to one another, which…