What compounding means
Compounding is earning returns on your returns. If you invest $10,000 and earn 6%, you have $10,600 after year one. In year two, you earn 6% on $10,600, not just on your original $10,000. Over time, this snowball effect is dramatic: that $10,000 grows to $57,435 over 30 years at 6%, even with no additional contributions.
How fees eat into compounding
A 1% annual fee doesn't just cost you 1% of your money each year; it reduces your effective return from 6% to 5%, which dramatically changes the compounding math. That same $10,000 at 5% for 30 years grows to $43,219 instead of $57,435, a difference of $14,216 from a seemingly small 1% fee. The higher the balance and the longer the horizon, the more damaging fees become.
The difference between 1% and 1.5% in fees
For an employee contributing $400 per month over 30 years at a 6% gross return, a plan with 1% all-in fees results in approximately $333,000. The same plan with 1.5% fees results in approximately $304,000. That's a $29,000 difference over a career, not from investment performance, just from fees. Lower-cost ETF-based plans like LINK's are structured to keep this drag as small as possible.
What 'all-in fees' means and why it matters
Some providers advertise a management fee of 0.5% while the actual all-in cost (including operating expenses, HST, platform fees, and advisor fees) is 1.5% or more. The only number that matters is the total expense ratio on your account: everything you pay annually, as a percentage of your balance. Your LINK member portal shows this clearly.