The cost of changing the taillight bulb
I was trying to change the taillight bulb in my car this weekend and realized that the head of the screw matched nothing in my toolkit. The dealership requested $185 to replace the bulb, a price I was not willing to pay to change a lightbulb! So I headed to my local Advance Auto Parts and met Jim who was very helpful. He looked up the part in the manual and located the $10 screwdriver and $5 bulb. The manufacturer could have used a philips screw to make it simple. Instead, they chose a proprietary solution because it put them – and their dealers – in control.
This “vendor lock-in” is also common in the world of wealth management. A lot of financial advisors, lawyers and insurance agents that work with high net worth clients create complex solutions for them, because that is how they get paid. I am currently cleaning up a legal bird’s nest of trusts, LLCs and unnecessary insurance policies for a new client just to return the family to normal. The advice they received in the past was horribly complex. It left them feeling helpless because they had to rely on “expert” advice (at $300 per hour) to make small decisions, like a gift to the grandchild, and to make matters worse the work was completely unnecessary.
Most people with money have good instincts and most financial decisions at home are not complicated. If your net worth is less than $15 million, there are very few financial situations that warrant the complexity the typical financial advice creates. But the financial factory, just like the automobile manufacturer, cannot make money if they keep it simple. Complexity keeps them employed. The next time someone suggests a solution to solve an estate, insurance or financial planning problem, ask yourself if the solution to your issue will make your life more complicated. If the answer is yes, get a second opinion. There are a few Jims out there to help you find that $10 screwdriver.