Investing via traditional wealth managers can mean paying 1% more every year than with a challenger wealth manager like Netwealth. 1% a year may not sound like a big deal; over time, however, it can become a huge deal.
This difference can help those with a longer timeframe to better maintain their investment targets – it helps enhance returns in the good times and to offset declines during market downturns.
Be better off if you are facing retirement
Having more money to hand at any stage in life is important, but let’s examine how much better off those nearing retirement can be when they pay 1% less in fees each year.
- Consider a 55-year-old investing £500,000 into a pension with a traditional wealth manager. They contribute £1,000 a month until age 65 after which they start to withdraw an annual retirement income of £28,000, adjusted for 2% inflation each year. With investment growth assumed to be 5%, and paying all-in costs of 1.65%, their retirement income lasts until age 95.
- By paying 1% less a year in fees with a firm such as Netwealth, and with the same growth, contributions and withdrawals, their pension pot would still be worth over £600,000 at age 95, hence many more years of retirement income are still available.
