You are quite correct on the lower return- and the impact of fees in general- and the underperformance in general of active advisors. I am in total agreement!
"mODEST" IS A RELATIVE TERM- Particularly compared to the fees that most retail investors are actually paying through their present -" professional advisors " between 1-2% not including 5.75% front load charges- churning and taxable sales. This is where many investors are presently guided through their company's sponsored IRA. The company thinks they are doing the right thing by their employees, and the employees select from the available limited investment options.
many "Investors - as the commercial I have heard- spend more time planning a summer vacation- than planning their retirement. Most do not want to learn to trade- would rather pay a "fee" to have it done professionally for them- and many are content in the knowledge they are saving for their future with a professional firm. Little do they understand the impact of the fees- Bogle makes this evident in his talks and writings.
Individuals can choose to do their own taxes- or have the CPA do it for a fee-
For many, it's not worth the aggravation to have to deal with it on their own-
Investing can see a similar lack of willingness for the individual to take on this
task.
For those not inclined to do their own due diligence and develop an interest in a diversified investment strategy--and portfolio allocation, and the need for rebalancing-
Getting a long term investment portfolio set up and periodically rebalanced by Wealthfront, Betterment, ETC- Vanguard for a mere fraction of what is traditionally charged is indeed "modest" comparatively to what they now pay presently.
For those that have the time, the inclination- and the stomach to manage a more active- self directed approach, The low cost- self directed approach is certainly available- If you have the skill and discipline .and you save the fee-- but if you have a portfolio with 6,7,8,9 allocations, and rebalance quarterly- That takes time- 4 times a year.
If my math is correct- if you have a $50,000.00 portfolio, a .30% total annual fee to manage that is $150.00. If your annual return is 4%- you make $2,000.00 .
Hmm is spending 4 Sundays a year to do my own rebalancing worth a $150.00 fee?
I think statistically, active retail investors tend to substantially underperform the developed approach for all of the usual reasons- Lack of discipline, emotional reactions to market swings-thereby underperforming the market and getting less than a 50% return.
The active retail investor - who trades on occaision- loses much more by being "active" and would be substantially ahead to take advantage of these alternate -low cost- investment available.
JMHO_