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What is wrong with the adviser intuition

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Reference no: EM131173348

You have an investment advisor who manages your investments worth $10 million for 10 years. He promises to get you very high annual returns (near 8% p.a. before fees, annual compounding) and asks for a fee of 1% of the value of the fund each year. He suggests that this is reasonable, as it is only about a $1 million decrease to your final wealth since a 1% fee each year over 10 years, as (1.01)10.46% in fees after 10 years. What is wrong with the adviser's intuition? Would you trust this adviser with your money?

Reference no: EM131173348

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