To be fair, banks do serve a wonderful purpose. They keep your deposits safe and can provide you the capital to make large purchases or investments. However, confusing that safety with your trust that those same banks are looking out for you can have an unimaginable impact on your net worth.
Banks generate impressive revenue marketing to their customers. Some of the stuff they are selling though should require their bankers/brokers to wear hazardous waste suits. Don’t know who the Big Banks are? Assume all brand name financial/insurance firms fall into this category until you confirm they do not.
What’s the big deal?
One way or another, whether you realize it or not, you are likely experiencing an incredible assault on your net worth. Just like a virus eats away internally, so do the investment products consumers are sold every day.
We have written previously on the hidden costs of investing that most investors unknowingly pay year in and year out. But doesn’t the investor get their money’s worth after all? Where then are all ‘The Customers Yachts?‘
Not only do the products and advice delivered by many banks/advisors fail to add yacht-type value, under typical circumstances, they can drain your investable net worth by upwards of 25% in the long run. That means a 25% hit to your annual retirement income, or a 25% smaller estate left to your heirs.
If this is such a huge cost to you, where does all that money go? The financial services industry invests billions, upon billions, upon billions every year and growing into advertising designed to sell us the story of how we can afford those yachts with their help/products. The investor pays for this, and the promise is almost always false.
These fees also pay the amazing salaries and overhead of Wall Street banks. Morgan Stanley’s CEO, James Gorman, “earned” $22,500,000 in 2014. He can afford a super yacht, several of them. Advisors can also be paid very well to sell you these investment products. Always know exactly how your advisor is compensated.
Bottom Line:
These firms are loaded with highly educated, well-meaning professionals. Unfortunately, despite their best intentions, they work in a business model designed around a lack of transparency that supports this plague on your net worth. Underestimating the cost could be the most expensive mistake you will ever make.
