"A penny saved is a penny earned."
—— Benjamin Franklin (1706-1790).
Many people assume that we focus exclusively on managing
our clients' investments. Nothing could be further from the truth.
While it certainly is important to prudently invest one's money, the surest,
easiest, and quickest way to increase your wealth is to spend less in unnecessary fees and
expenses. Ben Franklin was right: if you stop unnecessarily spending
$1,000 per year, you have made yourself $1,000 more wealthy by the end of the
We are obsessive about helping our clients save money and making prudent
decisions regarding their finances. Here's
some examples of how we prudently help our clients save money:
|Avoid High Fee Mutual Funds. The average mutual fund in the US has an expense ratio of about 1.15%.
Altruist's recommended portfolios typically have weighted average expense ratios
of under 0.5%. Many mutual funds charge as much as 1% or more annually
in 12(b)-1 fees. Altruist avoids recommending funds with 12(b)-1 fees.
Example: If you were investing $30,000 per year into a mutual fund with a 5%
sales load, you would be paying about $3,000 too much
per year (due to the sales load).
Example: If you have $300,000 in typical mutual funds (i.e., with an annual
expense ratio of 1.15%), you are paying at least $1,950 per year too much in
annual fees. If you instead used a diversified portfolio of
best-in-class funds (which might have a weighted average expense ratio of less
than 0.5%), you would be $2,400 richer every year (all else being equal).
|Avoid Whole Life Insurance Policies. We find that many people who buy life
insurance either buy too much or the wrong kind or both. This is often because they asked a life insurance salesman how much and what kind
they should get. Of course, the life insurance salesmen tend to
large amounts of the highest commission variety (whole life). For more
information on Life Insurance, see here.|
Example: If you were paying $2,000 per year for a whole life policy when
you could be paying $200 per year for a term policy with the same coverage,
you can save $1,800 per year in unnecessary premiums. It is far better
to increase your wealth, rather than the insurance company's or the
Example: If you were paying $2,000 per year for a whole life policy when you
have no need for insurance at all, you are unnecessarily throwing away much of
that money — you can save yourself $2,000 per year and get
a return of your small cash value by canceling the policy.
|Avoid Variable Annuities. All except the lowest cost Variable Annuities are appropriate
investment products for almost nobody. Their high fees usually
dramatically exceed whatever benefit of tax-deferral they might promise.
The extent of the fees is scandalous: it is not unusual for annual fees to be
two to three percentage points higher than necessary. If you realize the
extent of the high annual fees and desire to roll it over to a lower fee
Variable Annuity, you often are charged outrageous "surrender fees" of as high
as 10 percent or more.|
If you are unfortunate enough to be in one, we may be able to help. If
you are in a Variable Annuity inside a 403(b) plan, you may be able to roll it
over into a 403(b)(7) mutual fund without the high fees. If you are in a
Variable Annuity inside an IRA, you definitely can roll it over into a mutual
fund inside an IRA without the high fees. If you are in a Variable
Annuity outside tax-deferred retirement plans, you can roll it over to a low
cost Variable Annuity.
Unfortunately, the act of rolling over the Variable Annuity may cause you to
incur a surrender fee. We find that it often makes sense to pay the
surrender fee in order to avoid continuing to pay the excessive annual fees.
It is an uncomfortable situation to be in where you have a choice of either
continuing to pay outrageous annual fees or paying an outrageous surrender
fee, but we can't help this (we didn't put you in this position). The best strategy, of course, is to avoid
getting into such predicaments in the first place.
Example: If you are currently paying 3% in annual fees (including
management, administration, and mortality and expense fees) for your Variable
Annuity, you are paying more than two percentage points too much per year.
If you have $100,000 in such a Variable Annuity, you are wasting at least
$2,000 per year by unnecessarily paying exorbitant fees.
|Pay Down High Interest Debt First. While it may seem obvious,
we've seen many folks paying down low interest debt before their high-interest
debt. One example is (low interest) mortgage debt vs. (high interest)
credit card debt. Many people make extra principal payments on their
mortgages while carrying large balances on high-interest credit cards.
Given a choice, it is almost always better to pay off the higher interest debt
first. This can save large amounts of interest.|
The above examples are just that: examples. Our Comprehensive Financial
Plan looks at virtually all
aspects of your financial life to identify areas where you can prudently realize
savings. It's easy to see how our service may pay for itself in
just a few months. Would you like help identifying ways to prudently save money?
This web page contains the current opinions of Eric E. Haas at the time it is
written—and such opinions are subject to change
without notice. This web page is intended to serve two purposes:
|To educate the public; and|
|To provide disclosure of Mr. Haas' opinions to prospective clients.
We believe that prospective clients are well-served by being made aware of
what they are buying—and what they are buying is advice
that is based on these opinions.|
We believe the information provided here to be useful and accurate at the time
it is written.
Information contained herein has been obtained from sources believed to be
reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here.
Before investing, it is important to consult each prospective investment's
prospectus and consider both its risk/return characteristics and its effect on
your overall portfolio.
This information is not intended to be a
substitute for specific individualized tax, legal, or investment planning
advice. Where specific advice is necessary or appropriate, Altruist
recommends consultation with a qualified tax adviser, CPA, financial planner, or
investment adviser. If you would like to discuss the rationale or support
for any particular idea expressed on this web page, feel free to