Fanter Financial -- Hank Fanter

Caps vs Fees

Of the three components, participation rate, annual asset fee and cap, adjusting the cap usually has the least effect. However, a movable annual asset fee can have an extreme impact on indexed interest crediting.

A comparison of the impact of a cap vs. annual asset fee over the past 50 years shows the following:

A 15% cap would outperform a 4% asset fee 91% of the time.
A 15% cap would outperform a 3% asset fee 85% of the time.

85% of the time, the actual increase in the monthly average S&P 500 was less than 18%.

Here's a question:

Which would you rather have, a cap that comes into play 15% of the time, or an annual asset fee 100% of the time?

A 12% cap would outperform a 4% asset fee 80% of the time.
A 12% cap would outperform a 3% asset fee 77% of the time.

Over the past 50 years, 77% ot the time in each of the past 50 years, the actual increase in the monthly average S&P 500 was less than 15%.