Financial Advisor Fee Drag Calculator - Tool
What this calculator is for
The tool’s purpose is interactive and diagnostic. It quantifies the difference between a portfolio that grows at an assumed pre-fee return and the same portfolio growing after an ongoing advisory fee is deducted each year. It does not recommend products or predict future markets. It simply reveals the long-run math - a helpful, educational context when evaluating any service model or negotiating terms.
Key Takeaways
- The calculator estimates how a recurring annual advisory fee (as a % of AUM) compounds over time relative to an assumed annual pre-fee growth rate.
- Inputs are simple - portfolio value, assumed annual growth rate, AUM fee %, and years - yet the output highlights the large cumulative impact that fees can have over time.
- The interactive chart makes compounding tangible by overlaying before-fee vs. after-fee growth and shading the “fee drag” gap.
Inputs — what each field means (and why it matters)
- Portfolio Value: The current starting balance is analyzed by the tool. The higher the starting balance, the larger the dollar effect of the same fee percentage over time.
- Assumed Annual Growth Rate: A user-selected annualized growth rate before fees. It’s not a forecast; it’s an assumption used to compare two scenarios with identical markets—one with fees, one without. (Tip: Keep this conservative and consistent across comparisons.)
- Advisor Fee (% of AUM): The ongoing charge as a percent of assets under management, deducted each year. A 1.0% fee means the portfolio compounds at the pre-fee return minus the fee’s impact each year. Industry studies show that fee schedules often scale down at higher asset levels, which is why the percentage used should reflect a person’s actual agreement.
- Years: The investment horizon. Time is the amplifier: the longer the horizon, the more visible the compounding gap becomes. The SEC’s examples illustrate how fees widen differences over multi-decade periods. SEC
- Assumed math (shown under the button): The tool uses a simple annual compounding frame:
- After-fee growth factor ≈ (1 + pre-fee return) × (1 − fee): This isolates the fee’s role while holding market assumptions constant.
Outputs — how to read the results
- Cumulative fees
Total dollars paid over the chosen period. Helpful for answering, “What does this cost in absolute terms over time?” - Before-fee balance
The hypothetical ending value if the portfolio grew at the assumed pre-fee rate with no advisory fee. - After-fee balance
The hypothetical ending value after applying the fee each year. This is not a prediction; it’s a side-by-side math comparison given the same market path. - % wealth lost to fees
The share of ending wealth represented by the fee gap:
% lost = (Before-fee − After-fee) ÷ Before-fee.
This percentage normalizes the impact across different portfolio sizes and time horizons, making scenarios easier to compare. - Chart: “Before-fee vs After-fee over time”
Two growth curves: the lighter line (before-fee) and darker line (after-fee). The shaded area between them is the fee drag. Investors often find this visual more intuitive than raw numbers.
A quick way to apply this
Use the tool with the fee actually paid, the time horizon actually planned, and a single pre-fee return assumption across options. The output won’t tell anyone which path to choose—it simply makes the trade-off visible so the value received can be weighed against the long-run cost.
This interactive analysis tool uses hypothetical assumptions to compare fee structures and is provided solely for illustrative and educational purposes. Results do not reflect actual investment outcomes. The tool applies annual compounding of assumed returns, net of advisory fees entered by the user, based on simplified assumptions such as constant return rates, fixed fees, and the exclusion of taxes, withdrawals, and trading costs. Actual results will vary with market performance, fee schedule changes, and individual circumstances, and changing inputs will materially alter the outcomes. This tool does not constitute investment, tax, or legal advice.
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