Unlocking Consumer Surplus for a Secure Future
Eleanor inherited a $1.8M Traditional IRA and $450K in taxable accounts but felt overwhelmed. She struggled to understand if the advisor's fees were justified, given the income the plan was expected to generate, and lacked confidence in the proposed investment strategy.
By inputting the perceived value of the financial plan (e.g., peace of mind, professional management, tax efficiency – valued at $10,000 annually) and the actual cost (advisor fees of $15,000 annually), the Consumer Surplus Calculator revealed a negative surplus of $5,000. This prompted Eleanor and her advisor to re-evaluate the services provided and negotiate a revised fee structure or adjust the investment strategy to provide more tangible value.
The Consumer Surplus Calculator helped Eleanor compare her willingness to pay for the financial plan against the actual cost, revealing the 'consumer surplus' (or deficit) she was experiencing. This quantifiable result provided objective data for informed decision-making.
$5,000 annual savings on advisor fees, leading to $25,000 over 5 years, plus increased confidence in her retirement plan.
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