The investment industry often discusses cost as though it were purely an internal management issue.
It is not.
In investment management, costs that reach the product or service ultimately reduce the return retained by the owner of the capital.
The saver provides the money. The saver carries the market risk. The saver absorbs the drawdowns. The saver lives with the final outcome.
And the economic cost of the chain sits between the gross investment outcome and what the saver ultimately keeps.
The asset manager.
The pension administrator.
The broker.
The consultant.
The custodian.
The technology providers.
The executives.
The CIO.
The CEO.
The relationship architecture around them.
The departments created to reconcile other departments.
The spreadsheet.
The team that checks the spreadsheet.
The system that stores the spreadsheet.
The committee that discusses replacing the spreadsheet.
Small differences in annual cost become large differences when compounded over a working lifetime.
Illustratively, if the only difference between two otherwise identical outcomes were one percentage point a year, GBP 100,000 compounded for forty years at 5% would grow to about GBP 704,000. At 4%, it would grow to about GBP 480,000. The difference in terminal wealth is roughly GBP 224,000.
This is not a claim that any particular 1% fee is unnecessary. It is a demonstration of why every avoidable basis point matters.
Every avoidable basis point that can be removed from what the saver is charged is a basis point that can remain with the owner of the capital - and compound there for decades.
This is where the argument becomes uncomfortable, because it cannot stop at operations.
Leadership deserves to be paid when it creates value. A CEO who sets direction, earns trust, takes responsibility and improves outcomes is economically useful. A CIO who makes difficult decisions and accepts genuine accountability should be rewarded.
But executive roles can also become increasingly focused on relationships, institutional access, internal coordination and the management of complex organisations.
In my view, the question is whether the cost of that complexity is matched by measurable value for the owner of the capital.
How much of the economics generated on other people's capital is absorbed, before it reaches them, by layers whose value is difficult to measure against investment outcomes?
That is the question I want the industry to answer.
Not because high compensation is immoral. It is not.
If you earn millions because you make difficult decisions, accept genuine accountability and materially improve outcomes, defend your salary proudly.
But where compensation sits on top of avoidable complexity, duplicated functions, organisational inertia or relationship networks that create no measurable benefit for the owner of the capital, the economics deserve scrutiny.
Why are we structured this way?
Why does this function require this level of headcount?
Why do we need these layers of management?
Why are these systems still disconnected?
Which functions would disappear if the investment process were redesigned end-to-end?
What measurable value justifies each layer of executive compensation?
What exactly are we paying for?
And who ultimately pays for all of it?
The owner of the capital.
In a functioning competitive market, lower production costs should create pressure for lower prices or better value.
Investment infrastructure should not be exempt from that discipline.
Where concentration, switching costs, information asymmetry or organisational inertia weaken that competitive pressure, fees need not fall at the same pace as the technology and operating costs used to deliver the service.
The owner of the capital can end up paying the difference.
A person saving for retirement does not need organisational complexity for its own sake.
They need the return on their capital to compound.
They need professional portfolio construction, risk management, implementation and monitoring.
They need judgement and accountability.
They should not be asked to finance avoidable organisational excess where scale is not matched by measurable value.
The saver should pay for skill. The saver should not pay for complexity merely because complexity has become institutionalised.
As technology improves, the avoidable operational cost of delivering professional investment capability should be driven towards zero.
Necessary spending on resilience, control, judgement and accountability remains. Waste should not.
Pay the right fee. Reward real skill. Fund genuine value. Starve waste.
Fabio Agostini
Chief Executive Officer & Co-Founder
PoMaTo