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Financial Advisor Fees Are Irrelevant, If You’ve Already Paid Them
This guy has some good thoughts, If you haven't checked out his site: http://www.obliviousinvestor.com/ "Hi. I'm Mike Piper, the author of this blog. I'm a CPA and the author of several personal finance books. The point of this blog is to show that investing doesn't have to be complicated."
I absolutely agree that past fees are irrelevant. This is a double edged sword.
The question posed in the column (and echoed in the columnist's response) is what to do if you don't like the prospects going forward. The sunk costs are indeed irrelevant; so get out.
But by the same token, if the prospects going forward are favorable, and you've already paid the admission fee (load), there's not a reason to switch. To use the columnist's analogy, if you've paid for the ticket, and you like the move, stay for the whole show. The price of the ticket is still irrelevant.
Even if you don't like a particular fund, if you can find another fund in the same family that you do like, it makes sense to stick with the family - you've paid the admission fee, you like some of the shows inside the tent, stick around.
If the problem isn't with the funds but with the adviser, and you're paying ongoing fees, then that's another matter. Then it's not a question of sunk costs, but of future ones.
Comments
The question posed in the column (and echoed in the columnist's response) is what to do if you don't like the prospects going forward. The sunk costs are indeed irrelevant; so get out.
But by the same token, if the prospects going forward are favorable, and you've already paid the admission fee (load), there's not a reason to switch. To use the columnist's analogy, if you've paid for the ticket, and you like the move, stay for the whole show. The price of the ticket is still irrelevant.
Even if you don't like a particular fund, if you can find another fund in the same family that you do like, it makes sense to stick with the family - you've paid the admission fee, you like some of the shows inside the tent, stick around.
If the problem isn't with the funds but with the adviser, and you're paying ongoing fees, then that's another matter. Then it's not a question of sunk costs, but of future ones.