When is a discount really a discount? What is it that you are actually paying for? As we are firmly in the holiday shopping season, we are bombarded with the word “SALE” which connotes you are getting something at a better price than you might otherwise. But are you?
A “Sale” may sound good, but consider the thing you are contemplating buying. After all, you’ll be stuck with it going forward. As such, taking a little time to research the item (or good) seems like an implicitly rational idea. However, that’s not always what happens, is it? With time seemingly always getting away from us, we tend to not do the research necessary to determine the ultimate value of what we are getting relative to the product being offered. It is so much easier to look for the word “SALE” and just move on.
But maybe a sale comes with stipulations, or caveats…or warts. When things are on sale, does it include the label “All Sales Final”? Are there restrictions on terms of the sale? Is this thing right for you?
We constantly see advertisements from large firms which are cutting fees on their services in order to bring more customers into the doors. The question I always ask, being a little cynical, is “what is in it for them?” In a seeming race to the bottom on fees for services, how do they make a profit and, therefore, stay in business? The advertising promotes the low cost and fee structure. Conspicuously absent from these ads are the concepts of customer interaction, customer satisfaction, and customer experience, as well as the other fees that could be associated with this type of service.
Recently in the Wall Street Journal, Vanguard, the low cost leader, announced that they are lowering their already low fees on some index funds (i.e., funds that follow a broad universe of investments). Most likely, they are doing this in order to lure investors from rivals. Lowering costs is somewhat easy to do as index funds need little human interaction. And this model has been tried in other industries to great effect; it is great for the Home Depot model for Do-It-Yourselfers, for example.
I know it is boring and tedious to look at a prospectus to see the underlying fees which are discreetly charged on various investment products but it is interesting what you may find. No cost, low cost, no transaction fee…really? When people ask me about the fee structure of a Registered Investment Adviser and what they are getting for it, I always say, “The markets don’t know when you want to retire or what your personal situation might be.” The fees can seem low because “YOU” are taking all of the investment and decision risk upon yourself and do not have the benefit of having someone that knows you or takes the fiduciary responsibility to make sure your investments fit your situation.
A portfolio manager with a Registered Investment Advisor must always be looking out for your best interest, on the best days, the worst days and while you are away on vacation enjoying the fruits of your labor. This concept is called the Fiduciary Standard, and Bill Lee, one of my associates, wrote a blog back on May 31, 2018 that addresses this. It’s titled “Registered Investment Advisers: Held to a Higher Standard” and you can read it HERE. The question becomes, is this higher standard something that should matter to you? We think so.
At MONTAG, we are confident in the value we provide our clients and enjoy being held to the higher fiduciary standard. Just as with a physician, an attorney or an accountant, dealing in their area of expertise, we focus on your financial well-being. The fact that we also maintain a strong personal relationship with all of our clients is something we definitely don’t discount…and it’s certainly not up for Sale!