Here is the second part of my interview with Margot Bai, author of Spend Smarter, Save Bigger. If you haven’t read it already, the first part is available here and don’t forget to enter in the book giveaway (details at the end of this post).

Your book is packed with excellent advice on saving money. If there is only one piece of financial advice you could give, what would it be?

Margot Bai: Take responsibility for your financial future by educating yourself about money. Do not rely solely on the advice of a financial advisor: no advisor can or will take responsibility for making your dreams come true. It is your life and no one cares more about how it turns out than you do.

Financial services, like anything else, are a buyer-beware situation. You must learn about the options and risks and understand all the implications when you sign contracts for things like mortgages, insurance and investments. Take time to research low-cost alternatives to traditional financial services – no commission-based advisor will tell you about them. When you understand all the alternatives, you can accept some risk and responsibility in exchange for significant savings.

I was especially impressed with your advice on investing. Given that you also practice what you preach, how did you arrive at the conclusion that low-cost investing is very important?

Margot Bai: The topic of mutual fund fees is a controversial one. People who earn their living from these fees uniformly discount their importance. Conversely, independent sources are quite scathing about the negative impact of higher fees on returns.

The MER (management expense ratio) is charged regardless of whether the fund goes up or down in value. This is a great arrangement for mutual fund companies and salespeople, and not so great for consumers. Since there is no relationship between fund performance and fees, there is no incentive for fund managers to ensure their funds out-perform or for advisors to ensure they choose top performing funds for you.

Anyone can look at past performance and point out funds with high fees that have done well. But no one can guarantee which mutual funds will be star performers next year. The one thing we do know however, is that, on average, funds with lower fees out-perform funds with higher fees because of the effect of fees on returns. When you look at compound growth charts, a difference of just 1% or 2% in returns can translate into hundreds of thousands of dollars over a 30 year investment time horizon.

The logical conclusion is that investing in low-fee funds gives us the best chance for top returns. The savings are significant and well worth the extra effort involved in choosing a low-fee mutual fund company and taking responsibility for our own financial future.

Book Giveaway: Here’s your chance to find out if you think Margot Bai’s book is as good as I thought it was. I am giving away one copy of Spend Smarter, Save Bigger to one lucky reader. Entering the contest is very simple: just leave a comment with your email address (Privacy Policy) before 8 p.m. EST on Wednesday, February 7, 2007 and I will pick one entry at random. Open to Canadian residents only and only one entry per person. Good luck!