Cost of Being Wealthy

{{{ A family with a half-billion dollars in wealth could pay anywhere from 1.15% to 1.75% of their total assets in costs and fees annually, amounting to US$5.75 million to US$8.75 million, for instance, Cambridge Associates wrote in a recent report.

That’s a lot of “skim”. I wonder why a low-cost index fund or a big chunk of Berkshire Hathaway wouldn’t work for the wealthy? What are they teaching in elite private colleges? {lol}



They won’t be existing on ramen noodles any time soon. I’m not crying for them.

More realistically, at some point you have more than you will ever need, and it becomes OK to pay people to do things to free up your time. Because time is the one big equalizer. Rich or poor, all get the same 24 hours each day.

And let’s not mis-represent the article. Those costs you quote (1.15% - 1.75%) includes much more than investment asset management. It includes accounting, tax and estate planning, insurance, fiduciaries, lifestyle (concierge services for things like management of personal real estate, yachts, planes, bill paying), administration of philanthropy, continuity planning, and the costs of a physical family office (staff compensation, compliance, auditing, rent, and other expenses).

The investment costs - similar to what us common folks would pay for - runs about .75% to 1.05% of assets. Yes, that’s probably more than you would recommend, but there’s also higher costs associated with higher risk and higher yield investments that would not be appropriate for someone with less than a decent 8 figure investable wealth.



Well, I personally know someone whose investment assets are in $50M-$100M range. He simply put the management of these assets up for bids from the top companies and JPM won: .25% (1/4 of one percent).

I suppose something is better than nothing on larger asset bases. :wink:

BL Home Fool

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If you read your own link, you will see that the fee isn’t just for investment management.

Figure 5 illustrates an example where there was a 1.5% fee that covers the following:

15 family households
45 entities (trusts, partnerships, etc.)
65 tax returns
third-party advisors and a family office
private equity and hedge funds

Essentially, this is a family business.

I am pretty sure simply investing in BRK won’t result in 65 tax returns being completed.

I will note that Musk uses the same set up. He has a family office called Excession that manages his wealth.


I wouldn’t be at all surprised if they put some of those assets into funds that charge additional fees. Perhaps even JPM funds so they can collect some of those additional fees. After all, if they put the money in Vanguard funds with an expense ratio of 0.03%, then why even bother with JPM, and an extra 0.25%, in the first place?



I do not know the gentleman obviously but odds are either he is a business owner who does not know the markets or he inherited and does not trust his own judgement.

You would be mistaken as “double dipping” is a clear violation of the fiduciary standard and would result in massive fines (as has burned many a financial firm in the past).

Fiduciary Definition: Examples and Why They Are Important.

Becuase investment advice is likely the least of the services being provided.


Not being an expert, I’m not 100% sure, but I don’t think this would be an example of double dipping. If the manager being paid 0.25% invested in funds that directly gave them a [portion of the] fee in those funds, perhaps yes it could be double dipping. But if they are just funds from within the same financial institution, then I would think not. Otherwise you would end with up with the absurd situation that any institution that manages money (via “wrap” fees) could only put that money into financial instruments managed by OTHER financial companies!

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What I see is the potential for the individual broker to get his AUM fee, then putting some of that money into a mutual fund which also charges a management fee.

I don’t believe that fits the definition of double dipping, which seems to be related to transaction oriented fees rather than ongoing management fees.


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The person I mentioned started a small business with everything he owned, so if it failed he would have had a net worth of zero.

It worked and became a much larger business, and after decades he sold out and retired.




But again, that cost is only one component of the investment costs included in the study. Other costs included in investment services are strategic advice, custody and brokerage, performance reporting, and research. And as I noted just a few moments ago, there can be fees rolled into individual investments that are not included in the broker’s AUM fee - things like mutual fund management fees and hedge fund costs.

The study by Cambridge appears to be pretty comprehensive in the costs they included and not just focused on any one single cost.

And I think that’s the real lesson for those of us of more modest means. While we may not have a fully staffed family office to help manage our affairs, we still need to deal with most of these tasks. Let me lift a list of activities that the study included:

Investors of any size actually need to deal with all of these tasks in some way or another. We may not need to rent office space, but we need a space in our home that is amenable to managing our family finances. We may not have staff, but we need to do all of the tasks a staff would do. We have to think about our personal accounting and taxes and estate planning and insurance. We need to monitor investment performance and select our investments or our investment manager. We need to keep appropriate records, not only for taxes, but for proper management of our investment portfolio.

Sure, some of these tasks don’t take a lot of time for most folks. But they still need to be done to successfully manage your finances. There’s a lot to do when you really think about managing your family’s finances. And we each need to decide which of these tasks we will handle ourselves and which we will outsource.


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I am an “expert” (I am a fiduciary) and it would be double dipping. In the rare occasion where a firm uses their own funds (Fidelity does this often), they are required to rebate the fees related to those funds.

A further example, my firm switched from Vanguard S&P 500 Index that was charging .03% to Fidelity’s S&P500 index fund because the cost was 0.01%. We acted in the client’s best interest as any firm should do.


As long as the broker does not put it into a mutual fund that provides that fee to the same broker, then it would not be double dipping. It creates a conflict of interest if the broker is in any way monetarily advantaged by picking one fund over another when the fiduciary duty requires the broker to act in the best interest of the client.

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Let me see if I understand this.

If an investment advisor affiliated with, say, Fidelity, charges an AUM fee, then also puts their client into a Fidelity mutual fund that has a sales charge AND some part of that charge is paid to the broker as a commission, that is double dipping.

But if that same advisor - still charging an AUM fee - puts their client into a no-load Fidelity mutual fund, that is OK even though Fidelity also charges the mutual fund for portfolio management. It is not double dipping.

Do I have that right?


  1. They can’t use a fund with a sales charge. That is prohibited.
  2. If they use a Fidelity fund then they have to do one or the other (I don’t honest recall which): rebate the fees that fund charges or rebate the proportional amount of fees that fund represents. I think it is the later. So, even in the second scenario, if the advisor is employed or otherwise compensated by Fidelity, that would be deemed a conflict of interest that 1) must be disclosed and 2) adjudicated in some manner by a fee rebate. If that was an Ed Jones Advisor using Fidelity funds, there would be no conflict - assuming the EJ advisor is in no way compensated for picking a Fidelity fund.
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Holding a portfolio of a few index funds works for a net worth of $5 MM, $50 MM or $500 MM. And the $500 MM man doesn’t need to spend any more time on it (2 or 3 hours/year including tax planning) than I do. If our $500 MM man needs the services of a travel agent, butler, or a property manager, it’s going to be much cheaper to hire those folks directly rather than let an investment bank add a big markup to the cost of it.

About 25 years ago MarketWatch had an article on the scion of a wealthy Philadephia family who put everything in a portfolio of Vanguard tax-managed funds. I wish I could find it. But here’s an old article from Forbes explaining the idea.



But again, that cost is only one component of the investment costs included in the study. Other costs included in investment services are strategic advice, custody and brokerage, performance reporting, and research. And as I noted just a few moments ago, there can be fees rolled into individual investments that are not included in the broker’s AUM fee - things like mutual fund management fees and hedge fund costs.


And this is what you said was the fee range for just the investment portion in a previous post

I think just the investment costs today have come down substantially from the standards of yesteryear…especially in a zero-cost DIY environment.

Your mileage may vary. :wink:


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Yes. But even that portion can be broken down further, as I did in a later post.

They have, but that’s not my point. My point is that your friend’s AUM fees - which is what you quoted - are only a portion of investment costs.

If you invest in a mutual fund, you are also paying the fund manager.
If you invest in a hedge fund, you are also paying the hedge fund manager.
If you invest in an investment partnership, you are also paying the partnership’s manager.

This list could go on and on, but hopefully you get the point. AUM fees are only the start of investment fees.

Getting back to the study, the point there is that most people with truly significant wealth - those in say the top 0.5% of wealth - generally want to do things with that wealth other than sit alone in their 2 bedroom home and keep pinching pennies at every opportunity. They want to provide for their children and grandchildren. They want to support charitable causes. They want to influence society - perhaps via the political realm. They want to leave a lasting mark. And, of course, they want to spend some on themselves and enjoy life.

So to do that, they begin running their family affairs like a business. They hire people - either contractors or employees - to handle various parts of their affairs so they can do other things with their time. They don’t step away completely. They become the CEO of their family affairs, hiring people, giving them direction, and monitoring their performance. There is simply more to do than they have time to do.


How do you explain that firms still use Vanguard at 0.03% instead of Fidelity at 0.015%? Not only that, but the Vanguard S&P500 fund (~$800B) is bigger than the Fidelity S&P500 fund (~$400B)!

Vanguard has more DIY investors who are failing their “fiduciary duty” to themselves? {LOL}

Years ago I read an article on “zombie mutual funds” that had failed in some way due to poor investment returns, but still had $50 MM or $100 MM of assets under management and the expense ratio kept rising with the decline in assets. Who would invest in this? When they studied it, they found that investors were either unusually complacent, or actually dead and the assets were tied up in probate.