Every dollar you overpay in fees, commissions, or unnecessary intermediary costs is a dollar that never gets to compound. Cutting out the “fat” in your investment relationships, without cutting the professionals who actually earn their keep, is one of the highest-leverage things you can do for long-term returns.
Not every intermediary is fat to trim
Brokers, financial advisors, and bankers can add real value: sourcing deals you’d never find on your own, negotiating favorable financing, or providing access to instruments you wouldn’t otherwise reach. The calculation changes with your circumstances. When you have more time than capital, handling deals directly, sourcing, negotiating, and structuring financing yourself, can save real money in commissions. As your capital grows and your time gets scarcer, paying for good intermediaries becomes worth it, provided their fees are justified by what they deliver.
A simple toolkit for telling the difference
Four questions help separate value-adding relationships from costly ones:
- Do they win when you lose? Many mutual funds, 401(k)s, and insurance products carry fee structures that pay the intermediary regardless of your performance. Look for transparent compensation.
- Do they have skin in the game? Fiduciaries, legally bound to act in your interest, are the exception rather than the rule. Most financial representatives operate under a lighter “suitability” standard.
- Do they practice what they preach? Check whether an advisor actually invests in what they recommend.
- Where can you save time or money right now? When time is abundant, do it yourself. When it’s scarce, pay for expertise and protect your bandwidth.
Why “average return” can lie to you
A common trap is trusting an average annual return instead of the actual compounded result. Take $100,000 that alternates -50%, +50%, -50%, +50% over four years: it ends at $56,250, a -43.75% actual loss, even though the simple average of those four numbers is 0%. Fees compound the damage further. Actual, sequenced returns are what matter, not the average headline number.
Beyond public markets
Investors looking to cut out unnecessary fat sometimes move toward direct deals in operating companies, structured as short-term loans at 8 to 15% interest with collateral against receivables or inventory, or SaaS investments, where annual recurring revenue often commands multiples of 8 to 20x versus the 1 to 4x EBITDA typical of traditional small businesses. These are higher-complexity, higher-risk strategies that require real diligence and usually accredited-investor status; they aren’t a starting point for someone new to investing, but they illustrate how much value sits in structure and access once the basic fee-cutting discipline is in place.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
