Chat GPT on skim, a very impressive answer

Chat GPT continues to amaze me. The depth of these answers surprised me. The Python code is correct and the answer there is also surprising. (though I wish it had executed the Python code and just gave you the answer; I know how to run Python code, not everyone does). Perhaps I should have prompted it to run the code for me too.

How can a financial advisor making a small fee like 1 or 2% end up taking so much of a person’s financial assets?


A financial advisor typically charges a fee based on a percentage of the assets they manage for their clients. While 1% or 2% might seem small, it can still accumulate to a significant amount over time, especially considering compounding effects and the size of the investment.

Here are a few reasons why a seemingly small fee percentage can result in a significant portion of a person’s financial assets:

  1. Compounding: Over time, the fee percentage is applied not just to the initial investment but also to any returns earned. As the investment grows, so does the fee. This compounding effect can lead to a substantial portion of the investment being consumed by fees over the long term.
  2. Long-term investing: Many financial advisors aim to establish long-term relationships with their clients. If an investor stays with the same advisor for many years or decades, the cumulative effect of the fees can be substantial.
  3. Lack of awareness: Some investors may not fully understand the impact of fees on their investments, especially when expressed as a percentage. They might underestimate the significance of even a small percentage fee over time.
  4. Total expenses: Apart from the advisor’s fee, there may be other fees associated with investment products, such as mutual funds or exchange-traded funds (ETFs). These additional expenses can further erode investment returns.
  5. Opportunity cost: The fees paid to a financial advisor represent an opportunity cost—the potential returns that could have been earned if the fees were not deducted. Over time, this opportunity cost can be substantial.
  6. Value provided by the advisor: While fees are important to consider, it’s also essential to assess the value provided by the advisor. A skilled advisor might justify their fee by offering personalized financial planning, investment management, tax optimization, and other services that can enhance overall financial well-being and potentially offset the fee.

In summary, even though a fee of 1% or 2% may appear small, it can still represent a significant portion of an investor’s financial assets over time, especially when considering compounding effects and long-term investing. It’s crucial for investors to be aware of all fees associated with their investments and to carefully evaluate the value provided by their financial advisor.

Give me an idea how much of a portfolio an advisor at a 2% fee could end up taking over a 20 year period.


To estimate how much of a portfolio an advisor charging a 2% fee could end up taking over a 20-year period, we need to consider the impact of compounding and the cumulative effect of fees over time. Let’s assume the following:

  • Initial investment: $100,000
  • Annual return before fees: 6% (for simplicity)
  • Annual fee charged by the advisor: 2%

Using these assumptions, we can calculate the growth of the portfolio over 20 years and determine how much of it is consumed by fees. We’ll calculate the portfolio value each year, deduct the advisor’s fee, and track the remaining portfolio value.

Here’s how we can calculate it:

  1. Calculate the annual fee: Annual fee = Portfolio value * Advisor fee (2%)
  2. Calculate the portfolio growth before fees: Portfolio growth before fees = Portfolio value * Annual return rate (6%)
  3. Deduct the annual fee from the portfolio growth to find the net growth: Net growth = Portfolio growth before fees - Annual fee
  4. Update the portfolio value: Portfolio value = Previous year’s portfolio value + Net growth

We repeat steps 1-4 for each year over the 20-year period, starting from the initial investment.

Let’s use a Python script to calculate this:

pythonCopy code

initial_investment = 100000 annual_return_rate = 0.06advisor_fee_rate = 0.02 years = 20 portfolio_value = initial_investment total_fees_paid = 0 for year in range(1, years + 1): portfolio_growth_before_fees = portfolio_value * annual_return_rate annual_fee = portfolio_value * advisor_fee_rate net_growth = portfolio_growth_before_fees - annual_fee portfolio_value += net_growth total_fees_paid += annual_feeprint("Portfolio value after 20 years: $", round(portfolio_value, 2))print("Total fees paid over 20 years: $", round(total_fees_paid, 2))

Running this script will give us the portfolio value after 20 years and the total fees paid over that period. Note that actual results may vary based on the specific investment performance, fee structure, and other factors. However, this calculation should provide a rough estimate.

The results of running the code were:
Portfolio value after 20 years: $ 219,112.31
Total fees paid over 20 years: $ 59,556.16

The total fees paid were over 25% of the final portfolio value over a 20 year period.


Total portfolio, without an advisor fee: $320,713.55


That’s an even better view of it. You have only 68% of what you could have had, over 20 years, if you had not paid the skim. It’s amazing, and indicative of just how much a small skim can add up over the years.


Yeah, in 20 years, at only 6%, you’d lose $100,000 on a $100,000 investment.


Heck, even Vanguard’s “low-fee” (0.30%) Personal Advisor Service will take 10% of your wealth over a 60-year retirement investing lifetime (i.e., 30 years saving for retirement, and God-willing, 30-years spending money in retirement.) The guy with the 2.00% fee captures about half of it. That’s what happens when compounding is working against you instead of for you.



ChatGPT did not reinvent the wheel. It found a bunch of wheels and took half a dozen common spokes. Fed us some math. Presented it as most of the college papers would present it.

A newborn baby is sentient. A dog is sentient. The creators of AI hope that feeding the machines enough data will make it sentient. That is not how it works. A newborn has no data and is sentient.

The more complex AI presentations become…well there is still nothing extra added.

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We have sought for this extra stuff, the soul if you will, forever. The soul has alternatively been thought to reside in the heart, liver, brain, and lungs.

Chemistry is divided into organic and inorganic because it was thought that the stuff of life, organic stuff, had something extra. Now it’s clear that, at least for chemicals, there is no fundamental difference between organic and inorganic stuff. Chemistry has no soul.

If there is something extra it’s hiding pretty well. Maybe the hunt for AI will discover it.

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“That’s what happens when compounding is working against you instead of for you.”

I’ve had the lightbulb of recognition come on by letting a couple of friends and family members know that if they want to withdraw 4% from their port each year, and an asset manager gets 1%, then they will either only be getting 3% of the withdrawal, or they are actually drawing it down at 5% if they still take 4% and manager gets 1%… I told them that the manager is getting 25% of your yearly “salary”, is it worth it ??

I’ve also done a very simple math equation for them to illustrate compound interest over 25 year period. If they had $100,000 compounding at 6% per year for 25 years, they’d end up with about $430,000 ( ((1.06)^25) * 100000). If they earned 5%, the end sum would be about $340,000. But the manager taking 25% of their annual “salary” seems to make a bigger impression.

But most seem to think they can’t manage their own IRA, that they need the help of it being ran by a pro. I have showed them the Boglehead 3 or 4 fund system, they don’t even want to try that. But a couple have switched to just passive index port, and they are doing just fine.


Yeap! That “they need help” is a key part of the compounding power of the M&Sers and JCers within USAian society, and the training to “need help” with regard to capital begins early and ends only at the grave. And I can help you with that too…

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Coming from the artist/art side of it…the images are everywhere on FB. The mixing of things is sort of surreal. To do the mixing of things in art all the answers are “wrong”. I get wrong is a word that might be rejected.

For instance a wood carving with the carver sitting next to it. The caption reads, “I did this”. There are 5 fingers on the wood carver. AI did this.

The USCO calls AI public domain because it was created by a machine. There is more to that. The captions or descriptions by the people who get the output are turning into a falsehood or fraud.

That of course is a wrong answer.

Why would science be more accurate?

FSD right now is more dangerous than driving yourself.

How do we go from wrong answers to realism? In the arts? Or in FSD?

The other thing I like to point out is that if your financial advisor is taking 25% of your retirement income, it’s at least triple what the IRS is taking in Federal income taxes from a $100,000 IRA withdrawal (assuming that’s your only income for the year). It’s just nuts!



Seeing as how that money was not taxed going into the IRA why are you upset it is taxed coming out?

EDIT: Wait, I just figured out what you are saying - the advisor is 3X the hit of the tax man. yes, absurd!

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I’ve followed the retire early discussions (which includes the discussions about absurdly high management expenses) for decades now. And I’ve tried explaining some of these facts (and yes, arithmetic results are facts, not opinions) to friends and family, mostly to no avail. First off, people just don’t like talking about finances even tangentially. Second of all, even after I explain that there is no need to discuss numbers, just percentages, they still think I am trying to get them to divulge numbers (this is part of the general innumeracy, even among most otherwise intelligent people). And third of all, even if they do understand that it is a principle, rather than specific numbers, they think it’s all too complicated for a mere mortal (i.e. non-financial advisor) to understand. And then fourth, if they even listen to what I am saying half-heartedly, invariably the credentialism argument pops up (“Who are you to be able to inform me better than a financial advisor with a certification can?”). And even if all that is overcome, fifth and last argument, everyone is so clever nowadays and knows assorted buzzwords, so it’s “fiduciary” in most cases (“Ahhh, but the financial advisor has a fiduciary duty to me, and you don’t!”). So I’ve pretty much given up and don’t discuss it anymore, except with my own kids (they’re all adults at this point), and even then I can’t be sure how much is getting through.


Yep. The “fiduciary duty” doesn’t preclude an advisor from skinning you for a 2% annual fee, as long as it’s disclosed – and there’s no rule that says the advisor has to explain to the client that he’s taking half of your money over an investor’s lifetime.

Really folks, you don’t need to invent something, start a business, or do anything special to become wealthy. Just preventing yourself from getting screwed is enough to do it for you.



“The other thing I like to point out is that if your financial advisor is taking 25% of your retirement income, it’s at least triple what the IRS is taking in Federal income taxes from a $100,000 IRA withdrawal (assuming that’s your only income for the year). It’s just nuts!”

I never thought of that, it is nuts ! I think of taxes ( Fed and State and Property ) as bills that have to be paid. A financial advisor’s fee would be the biggest bill of the year for a whole lot of people. And it is a voluntary bill, it is so easy to do a Boglehead 3 fund port, and it is something that does not require any work on the part of the investor, truly a set and forget kind of thing, maybe once a year rebalance.