The Propeller – Financial Planner Fees: The Real Reason You Can’t Buy That Yacht – 3-30-2025

Fees on your investments are an absolute killer to your annual return, and therefore they significantly lower your net worth over the long-term. Fortunately, managing your own investments and retirement using index funds is incredibly easy and can help you avoid these costly fees.

This is seen on a smaller level with commissions and transaction fees. For instance, don’t purchase a mutual fund of one company at another brokerage. Instead, buy the ETF version. For example, instead of buying VTSAX (a Vanguard fund) at Fidelity, Schwab, or anywhere else, just buy the ETF version (VTI in this case).

But where fees really make a major impact is with financial advisor’s AUM (assets under management) fees and significant expense ratios on actively managed mutual funds and ETFs. AUM fees seem innocuous at “only 1%” or so, but I want to show you how significantly this can impact your net worth:

Let’s say you’re on the Financial Indepdence path and you managed to accumulate $500,000 in investable assets. Assuming an 8% average annual market return, let’s look at 4 scenarios of what your money would grow to over 30 years:

Full market return of 8% annual return: $5,031,000 net worth

Market return of 8% minus 0.03% expense ratio on VTI: $4,990,000 net worth ($41,000 lost to fees, but this is realistically the best you could hope for)

Market return of 8% minus 1% AUM fee and 0.03% expense ratio on VTI: $3,774,000 net worth ($1,257,000 lost to fees)

Market return of 8% minus 1% AUM fee plus 1% expense ratio (advisor puts you in an actively managed fund): $2,872,000 net worth ($2,159,000 lost to fees! This is 43% of your net worth gone because you invested with a financial advisor in an actively managed fund)

As you can see, the impact of fees on your investments can be substantial. By managing your own investments using low-cost index funds like VTI, you can avoid these fees and maximize your returns. Index funds are easy to manage, require minimal effort, and provide broad market exposure, making them an ideal choice for both novice and experienced investors.

Quit thinking that Financial Advisors have the only answers to successfully managing your retirement money (They usually try to make things seem complicated to justify their existence!).  They will likely put you in the same investments you can easily do yourself.  Message me if you need help getting started in a successful plan for early retirement – I can share what I’ve done that is working quite well!

As the baseball season kicks off, it’s a great time to reflect on how the game can teach us valuable lessons about success in business and life. Too many people are looking for a home run, that one massive hit that will fast-track their progress and somehow guarantee success and an easy life moving forward. But that’s not how it works.

If you’re always looking for the home run, it’s extremely unlikely that you’ll ever get it. And if you do get it, you won’t have a strategy for replicating that win in the future.

Baseball games aren’t won from a single home run. They’re won by running up the score through strategy, skill, great pitching, great fielding, bunts, and stolen bases—great fundamental skills repeated over and over and over.

Your success in business and life will be no different. If a home run is a major breakthrough or one massive initiative that’s a success, base hits are the small, daily wins. Showing up and executing your tasks at a high level. Holding yourself and the people around you to a high standard. Attacking the day with urgency and intent. Learning and building new skills. Doing these things even on the days when you’d much rather quit than take another step forward.

These are your daily wins. They’re actions you can repeat every day to continue making progress. Quit looking for the home run. Invest your effort and energy into solid fundamental execution and strategy by stacking up daily wins. It’s the only strategy that will guarantee you win long-term.

Why is Boeing, a seasoned aerospace giant, struggling with space exploration while SpaceX, a relative newcomer, is soaring to success?

Boeing, with its rich history in aerospace, has been a leader for decades. However, this long legacy also brings challenges. Boeing is often tied to older, more rigid systems and faces layers of bureaucracy that can slow down innovation. Their reliance on established practices and government contracts can make it harder to pivot quickly or adopt cutting-edge technologies, including artificial intelligence (AI).

On the flip side, SpaceX, founded by Elon Musk in 2002, had the advantage of starting with a clean slate. They embraced a culture of innovation from day one, focusing on agility, rapid prototyping, and learning from failures.  Their ambitious goals—like reusable rockets—pushed them to constantly innovate. Plus, being privately funded, SpaceX had the flexibility to take risks that traditional companies like Boeing might shy away from. 

AI has played a significant role in SpaceX’s success. By leveraging AI, SpaceX can optimize rocket designs, predict and mitigate potential failures, and streamline operations. This technology allows for rapid iteration and improvement, which is crucial in the fast-paced world of space exploration. Moreover, AI-driven analytics help SpaceX make data-informed decisions, enhancing their ability to innovate and stay ahead of the competition.

Moreover, SpaceX’s hands-on approach, with engineers working closely on the factory floor, has enabled them to iterate and improve their designs quickly. This lean approach, combined with a clear vision of lowering space travel costs, has allowed SpaceX to outpace more established players. 

In short, Boeing’s struggles reflect the challenges of adapting a legacy company to a rapidly changing industry, while SpaceX’s success is driven by a modern, innovative, and risk-tolerant approach, heavily supported by AI and rapid innovation. It’s a fascinating clash of the old guard versus the new wave in the race to the stars!

Subaru Loves the Earth® is around the corner and they are excited to announce our new partnership with the Arbor Day Foundation! This spring, Subaru will provide and distribute trees to local communities across the country. Anyone, regardless of owning a Subaru, can reserve a mature (2 to 4 feet tall), regionally-appropriate tree free of charge at their local participating retailer.

Click here to reserve your tree now, and please share this link with any of your friends and family that may be interested as well! 

Miss the last issue of the Propeller?  No worries, I’m now experimenting with doing a podcast overview of each weeks newsletter.  Check it out below.  No fancy intro or outro or anything yet, please give it a listen and let me know your thoughts!

“In the face of adversity, let your spirit shine even brighter”
– CASTER SEMENYA
 

This quote encourages resilience and positivity during challenging times. It suggests that when we encounter difficulties, we should not let them dim our inner light or dampen our spirits. Instead, we should use these moments as opportunities to demonstrate our strength, courage, and determination. By maintaining a positive attitude and allowing our true selves to shine, we can overcome obstacles and inspire others around us. This mindset not only helps us navigate through tough situations but also fosters personal growth and resilience.