Management fees or returns? What's preferable?

Also, a small tip at the end 😊

Since branching out in 2015 as an independent business owner in the insurance field, I'm constantly hearing about management fees from my clients.

Sometimes it feels as though it's all they care about…

I understand the importance of reducing expenses as much as possible, because it's critical in the long run. However, there are other options besides reducing management fees.

Inadequate insurance coverages are critical, the level of service received from your chosen insurance agency or company is critical, and of course, the returns are critical.

The majority of my clientele aren't usually aware of the possibility of creating an IRA account via provident funds or advanced study funds (Keren Hishtalmut), which allows them to buy and sell securities as they please.

I understand the S&P 500 index has historically displayed the best returns. Therefore, an IRA account and automatic index purchase can probably be a good option for the future. No one can really know, maybe we're even reaching the end of days?

Therefore, if we're talking about an investor with a bit more awareness and confidence, who wants to make their own choices, I completely understand their borderline-obsessive desire to reduce management fees. however, most customers aren't even close to that level of awareness.

They want a great company to manage their money AND low management fees. A company with high returns and a high Sharpe index in the last decade and low management fees just don't go together.

In these cases, I think it's better to analyze the company's nature, and whether it can repeat its historical returns. Here again, no one can be sure or predict the future, but you can use the data from Benjamin Graham's book 'The Intelligent Investor', and determine if it's a focused and modest company, or a company advertising on every corner – which is an ominous sign according to Graham.

If we perform a 10-year historical comparison via the governmental Gemel Net website (Provident Fund Comparison System) we can see that the companies that changed relatively high management fees usually display significantly higher returns by tens of percent in comparison to companies with discounted management fees. I guess you need to pay in order to work with the leading investment managers in the market.

Think differently? I'd love to hear about it 😊

And for the promised tip –

Majority of the population deposits into their pension via the pension fund. However, most people aren't aware that once they end employment at an employer, the pension fund goes into a 'temporary risk' state, meaning they only pay for the insurance coverage, without making deposits, until finding a new job. Management fees rise by up to 0.5% accumulative, and 6% from deposits.

This is simply hogwash opportunism done by insurance companies or investment houses, because the movement of funds during 'temporary risk' can seriously harm clients from an insurance coverage point of view.

I'm begging you – don't give in to them! Do everything in your power to stop the management fee raise. Stay aware and don't miss the signs.

If you have a good, reliable insurance agent – one phone call should be enough. It's a simple matter that will show you if your insurance agent cares about you, or if you're just another meaningless name in their appointment book.