Why Fees Matter

Fees are one of the most powerful — and most overlooked — forces in investing. They don’t just reduce returns in a given year; they compound relentlessly, eating away at wealth like a hidden tax. Because fees are deducted quietly, investors often fail to notice their impact. Over time, the effect is profound, leaving portfolios far smaller than they otherwise could have been.

Most traditional advisors charge a percentage of assets under management. Smaller accounts are hit hardest, sometimes paying as much as two and a half percent annually. Larger portfolios are billed at lower rates, often around one percent or slightly below, with the very largest accounts sometimes negotiated down further. Regardless of the tier, the structure is the same: as your portfolio grows or markets rise, your fee automatically increases — even if the advisor’s workload stays the same.

At first glance, a one percent fee might not seem alarming. But consider the long-term impact. Imagine an investor starting with $100,000 and earning a six percent annual return over 35 years. If fees reduce returns by just a quarter of a percent, the portfolio could grow to about $700,000. But if fees are five times higher, reducing returns by one and a quarter percent, the portfolio might grow to only $500,000. That’s a $200,000 shortfall — forty percent less — simply because of higher fees.

This is why percentage-based fees are so dangerous. They quietly compound against you year after year, siphoning away future wealth without you ever writing a visible check. The investor often doesn’t see the real cost until it’s too late.

Traditional advisors defend these fees with promises of value. They claim they can beat the market through active management. They point to sophisticated planning strategies, exclusive access to private markets, or “proprietary insights” that supposedly deliver greater diversification, reduced volatility, and higher returns. The pitch is polished and convincing, designed to make complexity sound like an advantage.

But decades of independent research tell a different story. Very few portfolio managers consistently outperform the markets they track. In any given year, most underperform their benchmarks. Those who succeed one year rarely repeat their success the next. The results are random, and the pattern is clear: paying higher fees for skill that cannot be consistently demonstrated is a losing game.

Even passive and index-based advisors aren’t always low-cost. A private study of hundreds of so-called passive firms found that the average annual fee was sixty-five basis points — 0.65 percent of assets. That means $6,500 per year on a one-million-dollar portfolio, $15,000 on a two-million-dollar portfolio, and $50,000 on a ten-million-dollar portfolio. These fees are charged every year, automatically increasing as your portfolio grows. Over decades, they quietly transfer enormous amounts of wealth from you to the advisor.

And what are you really paying for? Too often, high fees support expensive office space, layers of administrative staff, and slick marketing campaigns rather than better investment outcomes. In essence, you are paying for the appearance of value rather than value itself.

At Cardiff Park Advisors, we reject this model. We believe that fees should reflect the actual work performed — not the size of your portfolio. That’s why we charge a fixed annual retainer rather than a percentage of assets. Most new client relationships fall between $8,000 and $14,000 annually, billed quarterly in arrears. This structure keeps costs predictable, eliminates conflicts of interest, and ensures that as your portfolio grows, your fees don’t automatically grow with it.

Our focus is simple but powerful: disciplined strategy, broad diversification, and minimizing costs. By stripping away unnecessary fees, we leave more of your portfolio’s returns where they belong — with you. Every dollar saved on fees is a dollar that continues to compound in your favor, year after year.

If you care about your long-term wealth, understanding the compounding effect of fees is essential. The difference between a fair, transparent fee structure and a percentage-based model could mean hundreds of thousands — or even millions — of dollars over a lifetime. At Cardiff Park, our mission is to keep that difference working for you, not against you.

Learn More About Us

Cardiff Park Advisors is based in Carlsbad, California, about 25 miles north of San Diego, with an additional office in San Marcos. We work with clients across the United States and internationally.

When you’re ready to take the next step, we offer a complimentary consultation. Please complete the Connect Form below — in the footer — and we’ll follow up to schedule a conversation.

To learn more, visit www.cardiffpark.com, review our Form ADV Brochure on the SEC’s website (ADV Part 2A), email us at jgorlow@cardiffpark.com, or call 760-635-7526.