This firm has a radical new plan to keep clients focused on long-term investing

The longer you invest your money with Ritholtz Wealth Management, the less it will cost you.

On Wednesday, Ritholtz Wealth Management, which is run by financial media personalities and long-time investment pros Josh Brown and Barry Ritholtz, announced that it will lower fees for clients invested with the firm for at least three years. Ritholtz Wealth Management opened its doors two years ago today.

The firm said that effective immediately, upon completion of their 36th month clients are eligible for reduced fees, with this resulting in savings of approximately 16% per yer in fees, according to the firm.

The firm said its inspiration for the structure came from an article in The Wall Street Journal written by its personal finance reporter Jason Zweig.

In his article, Zweig noted that at least one hedge fund in Boston had enacted a similar strategy, reducing fees for clients that committed to three-, five-, or seven-year-long investment periods.

Zweig wondered why mutual fund weren’t rewarding clients for similar behaviour, and Brown said this article was a “eureka” moment for the firm.

Brown added that, “We constantly preach the message that behaviour is the most important determinant of investment success over the long term. The ability to stick with a sensible strategy will have a greater effect on future outcomes than the state of the economy, level of interest rates, valuation of the stock market or fund selection.”

Recently, we noted that amid the recent stock market chaos it was important for investors to keep in mind that while conditions can get rocky over the short-term, continuing to invest money on a consistent schedule will yield long-term gains.

Take, for example, the difference between $US50 a month in the S&P 500 against holding that money in cash.

And this chart from Vanguard shows the amount of money lost to fees on a hypothetical account that starts at $US100,000 and grows 6% each year with gains reinvested. The amount lost to fees over this time frame is really staggering (to say nothing of the returns, which after 20 years seem so-so before really taking off in the last decade: compounding interest is your friend).

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