Why a small number turns into a big one.
A 1% annual fee on a portfolio that compounds at 5% net effectively reduces the compounding rate to 4%. Over a 30-year horizon, the gap between 5% and 4% compounding is not 1% of the result. It is closer to 23% of the result.
Where the fee actually goes.
- Management fee on the underlying funds (often 0.4 to 0.8%).
- Distribution and advisory layer on top (often 0.2 to 0.5%).
- Entry costs amortised over the first years of the contract.
- Performance fees on certain Tak 23 funds. Rarely transparent.