The Hidden Cost of High Fund Fees: Impact on Wealth and the Economy

How traditional banks fool you, eroding your savings, favouring inequality, slowing global growth and contributing to the steep decline in trust in financial institutions.

Some days ago, I encountered a situation that reminded me how critical it is to stay vigilant with investments. My 88-year-old mother, like many people her age, doesn’t have substantial savings. But every euro she saved makes a meaningful difference.

She needed a low-risk option to save her savings from inflation and currency depreciation as much as possible without incurring in any risk, so I turned to money market funds, which seemed like the perfect fit. The bank confidently recommended a fund:

BBVA Bonos Internacional Flexible FI (ISIN: ES0179396009). It sounded fine at first, but as I dug deeper, I realized the fees were uncomfortably high. After some quick research, I found an alternative: AXA Tresor Court Terme C (ISIN: FR0000447823), a similar fund but with significantly lower fees.

Both funds aim to deliver the same annual gross return of 2%-3%, but the fees drastically changed the net results. Curious to see the long-term impact, I ran the numbers for a €10,000 investment over different time horizons. Here’s what I discovered: