Fixed adviser fee and wasteful platform fees

If your portfolio had a gross investment return of 8%, the net return after the fees, in our example is 5.45%. Or to put it another way, more than 30% of your investment return is being eaten away in fees! This situation takes on a greater importance, as when your investment grows, so do the fees. This is highlighted in the table below.

Investment Portfolio of $200,000 with a 20 year term – Balance after fees.

Gross Return Zero Fees Fees at 1.00% Fees at 2.00% Fees at 2.55% Fees at 3.00%
6% $641,427 $530,660 $438,225 $394,130 $361,222
8% $932,191 $773,937 $641,427 $578,045 $530,660
10% $1,345,500 $1,120,882 $932,191 $841,702 $773,937

As you can see, if your investments earned a Gross Return of 8%, with no fees attached, the balance would be $932,191. With fees charged at 2.55%, your $200,000 has only grown to $578,045. The fees charged over this period will have been $354,146. ($932,191 – $578,045 = $354,146).