One specific way I have helped a client understand the impact of fees on investment returns is by breaking down the compounding effect of fees over time. For example, I had a client who did not realize that a seemingly small annual management fee was eating into their long term gains. I created a simple comparison showing two portfolios, one with no fees and one with the less fee, both earning high return over 20 years. The difference in the final value was staggering, with the portfolio paying fees having significantly less growth. By visualizing this in dollar terms, the client immediately grasped how even small fees compound to a major loss in wealth over time. This led them to reconsider their investment choices and seek lower cost options.
For instance, one particular way I assisted a client in getting a grasp of how fees and costs will definitely eat into their investment returns was by designing a specific comparison consisting of various fee structures. I calculated the possible future incomes per each option - on low-cost vs high-fees investments - and demonstrated how the long-term profitability could be affected by - even one or two percent low or high fees. How, for 'normal' investors, using a few bar graphs, explained the effects of compounding fees on the returns index over the 10-year horizon and the 20-year horizon. And this, in which the client presented investments that were clearly [sic] lower in exposures, and costs gave a better return on the overall investment, helped the client a lot in making decisions. For them, it was a real surprise, and they like how forthright the explanation was about cost versus benefit.