Robo-Advisor vs Self-Investing Calculator

What the Fee Gap Costs

A managed service and a self-directed portfolio can hold the same underlying funds and still end at different values, because the managed service adds its own charge on top of whatever those funds already deduct. That is the whole of what this calculator measures: one gross return, two total charges, compounded over the horizon entered. Charges on both sides vary widely by provider and market, and the fields take the total annual charge published for each arrangement.

How the Comparison Works

Each side compounds at its net rate, the gross return less its total charge, applied once a year. The charge is subtracted from the return rather than deducted from the balance, which is a simplification worth naming: a charge levied against the balance compounds slightly differently, and opens a gap about 6.5% wider than the one shown here. That ratio holds at any starting amount, so the figure reported is the smaller of the two throughout.

The model runs a lump sum with no contributions and no withdrawals, so the result is the terminal difference between two untouched portfolios rather than a running cost.

Worked Example

On the sample figures used on this page, 100,000 at a 7% gross return over thirty years, with a total managed charge of 0.4% against a self-directed charge of 0.1%, the self-directed side reaches 740,169.45 and the managed side 680,324.55. The difference is 59,844.90, which is 8.09% of the self-directed final value. A three-tenths-of-a-point difference in annual charges accounts for all of it.

Which Input Moves the Result Most

The two charge fields, by a wide margin. At the default charges of 0.4% against 0.1% over a thirty-year horizon, adding a percentage point to either one moves the result between nine and thirteen times as far as a percentage point added to the gross return. The range is that wide because the gross-return lever is itself asymmetric: a point added moves the result further than a point removed, so dividing by the smaller downward move gives the larger multiple. The multiples are unchanged by the starting amount, since it multiplies both sides equally, but they do shift with the charges and the horizon entered.

That ordering is the point of the tool rather than an incidental property. The gross return applies to both sides and largely cancels in the difference; the charges do not. Lengthening the horizon widens the gap for a separate reason: the charge difference that survives each year is itself compounded by every year that follows.

What the Charge Buys

A managed service bundles things a self-directed portfolio would have to arrange separately: periodic rebalancing, in some markets an automated approach to realising losses against tax, goal tracking, and a default that removes the decision of what to hold. The calculator prices none of these. It reports what the charge difference costs, and whether that is a fair exchange for the services attached to it is a judgement the arithmetic cannot make.

One structural point is worth stating. Where a portfolio sits in an account whose gains are not taxed as they arise, any tax-related component of the service has nothing to act on, so the charge difference is closer to the whole of the difference between the two options.

What the Model Does Not Capture

The gross return is held constant for the whole horizon, which no portfolio delivers, and both charges are held constant too. Contributions, withdrawals, tax on gains, dealing costs, bid-ask spreads and the cost of rebalancing are all outside the calculation. So is the possibility that the two arrangements hold different assets: the comparison assumes the same gross return on both sides, which isolates the charge but does not describe two different portfolios.

The charge fields take a total. Where a managed service quotes a platform charge separately from the funds it holds, the gap is understated unless both figures are combined.