A recurring percentage needs a dollar translation
A 1% annual management charge on a constant $500,000 balance is $5,000 per year. At $1 million, the same assumed rate is $10,000. Actual bills depend on the agreement, balance measurement, billing schedule and any fee tiers. An asset-based fee is not necessarily a fixed annual invoice.
The SEC's investor bulletin on fees explains that ongoing charges reduce portfolio value and the amount available to earn future returns. Adviser charges and fund expenses can be separate layers. Review the disclosures to find the total, rather than treating “no commission” as “no cost.”
A FeeHQ compounding illustration
Start with $500,000, assume a constant 5% annual return before fees, and subtract an annual fee rate of either 0.25% or 1% from that return. No contributions, withdrawals, taxes or inflation are included. These are invented scenarios, not forecasts, market averages or comparable investment offers.
| Years | 0.25% annual fee | 1% annual fee | Difference |
|---|---|---|---|
| 5 | $630,580 | $608,326 | $22,254 |
| 10 | $795,262 | $740,122 | $55,140 |
| 20 | $1,264,884 | $1,095,562 | $169,322 |
Formula: starting balance × (1 + assumed gross return − annual fee rate)years. Results are rounded to the nearest dollar. This simplified model applies the net growth rate once each year; actual fee deductions and investment returns vary.
The gap is not just fees paid
The difference between the two ending balances includes growth that was not earned on money lost to higher fees. Do not label the whole difference an invoice or a guaranteed saving. Different investments and services can produce different outcomes.
Compare the service as well as the rate
Write down what the quoted fee includes: portfolio management, financial planning, ongoing meetings or other work. Then list charges outside that quote. A low management rate with costly underlying holdings can be more expensive in total than its headline suggests.
Use the same balance and time period for both proposals. If one has a minimum annual charge and another has percentage tiers, ask for worked dollar examples at your starting balance and at a higher balance. Comparing a percentage against a monthly subscription without annualizing it can conceal a large difference.
Questions to put in writing
- What would the total annual dollar charge be at this balance?
- Which fund expenses or account charges are additional?
- Are cash holdings included in the billable balance?
- Does the rate change at a threshold, and is the new rate applied to all assets or just one tier?
- Are there fees to transfer or close the account?
Fees are one comparison factor alongside risk, services and investment suitability. This guide explains cost arithmetic; it does not recommend an investment or a provider. For an employer plan, see how 401(k) fee layers differ.
Sources & review notes
Reviewed October 23, 2026. Examples and calculations are FeeHQ illustrations, not quotes or guaranteed outcomes. Provider terms and individual circumstances vary. How we research fees.