I DON’T WANT to pay for things that aren’t useful—and I’m not interested in wasting money. Nobody is.
For instance, over the past 15 years, 89% of actively managed U.S. stock funds failed to outperform the broad U.S. stock market, according to S&P Global. Why would people waste their money and continue to pay for something that isn’t useful? Turns out, people aren’t. We’ve seen money flooding into lower cost, passively managed index funds.
Last year, Fidelity Investments launched four index mutual funds with zero expense ratios. SoFi is introducing zero-fee exchange-traded index funds (ETFs). Salt Financial has indicated in an SEC filing its intention to market a “negative fee” ETF, which will pay people to invest in it. Last year, robo-advisor Wealthfront began offering its financial planning tool at no cost. Robinhood is offering commission-free online trading, while Chase will let you make your first 100 trades for free.
But even as investment costs come down and free financial resources become increasingly available, a basic problem remains: To benefit, folks need to take action. Action is required at the beginning of the financial planning process—and also at the end.
Many financial advisors tell me that not only is it difficult to get people fully engaged on the front end, by sharing information and talking about their concerns and priorities, but also it’s a challenge to get them to follow through on the back end and implement the advisor’s recommendations.
On the front end, it can be uncomfortable to openly discuss negative feelings about money. We just don’t have conversations about our finances very often—and our instinct is to put the best face on our financial situation, because money is a source of shame for many. On the back end, we fall victim to procrastination on even the simplest of tasks. It’s amazing how long we can drag our feet on changing a beneficiary designation or getting a will.
Whether you’re working with an advisor, or you’re putting a plan together on your own, this inaction will keep you from reaping the benefits of today’s increasingly low-cost financial world—and it’ll stop you from enjoying the financial future you want.
How can you motivate yourself to act? Who can help hold you accountable? Who can you have an open and honest conversation with—including about money? A brighter financial future could hinge on those answers.