What Are Fees Really Costing You?

The Model

This calculator shows how advisory fees compound over time and erode portfolio value. It grows the same starting investment under two different fee levels, using the same gross return, so you can see the cumulative impact of the fee difference.

Key Calculations

• Net return: Each year, the portfolio grows at (Gross Return − Fee Rate)
• Compounding: Balance = Previous Balance × (1 + Net Return)
• Fee drag: The difference between the two ending balances represents the cumulative cost of the higher fee
• The shaded area between the two lines on the chart visually represents the wealth lost to the fee difference

Assumptions

• Returns are constant each year (no market volatility)
• Fees are deducted annually as a percentage of assets
• No additional contributions or withdrawals during the period
• No taxes, trading costs, or other expenses are included
• Both portfolios start with the same investment and earn the same gross return

Interpreting Your Results

• The solid blue line (Fee A) and dashed gray line (Fee B) show how each portfolio grows over time
• The shaded area between the lines represents the cumulative wealth difference
• The amber difference box shows the total dollar amount lost to the higher fee
• The percentage shown is how much of your original investment was effectively consumed by the fee gap

Tips for Using This Tool

• Compare your current advisor fee against alternatives to understand the true long-term cost
• Even a 0.5% fee difference can cost hundreds of thousands over 25+ years on a large portfolio
• Remember that fees are just one factor, also consider service quality, financial planning depth, and tax management
• Extend the time horizon to 30-40 years to see how fee drag accelerates over time
• Try setting Fee A to 0% to see the total cost of fees compared to a fee-free scenario