Calculator Use
This financial advisor cost calculator is designed to help investors understand the total dollar amount they pay for professional financial advice. Because fees are often deducted directly from investment accounts, they can remain "invisible" to many clients. This tool brings those costs to light by calculating AUM fees, flat fees, and hourly rates into one comprehensive total.
By entering your specific portfolio and fee details, you can compare different advisory models and see the impact of costs on your wealth. Use this to determine if you are paying a fair market rate for the services provided.
- Portfolio Size
- The total market value of all assets managed by your advisor (e.g., 401k, IRA, Brokerage accounts).
- Annual Fee Rate (%)
- The "Assets Under Management" (AUM) fee percentage charged annually. The industry average is typically around 1%.
- Fixed / Retainer Fee
- A flat dollar amount charged per year, regardless of your portfolio size.
- Hourly Rate & Hours
- Used for project-based advice or specific consultations (e.g., creating a one-time financial plan).
How It Works
Financial advisors typically use one of three primary billing methods. The financial advisor cost calculator applies these formulas based on your selection:
Total Annual Cost = (AUM % × Portfolio) + Flat Fee + (Hourly Rate × Hours)
- AUM Fee: The most common model where advisors take a percentage of the total assets managed.
- Flat Fees: Often preferred by high-net-worth individuals to cap costs.
- Effective Rate: Calculated as (Total Cost / Portfolio Size), which shows the true percentage you are losing to fees each year.
Calculation Example
Example: An investor has a $750,000 portfolio. Their advisor charges a 0.85% AUM fee plus a $1,500 annual technology and planning fee. They met for 4 hours of extra project work at $200 per hour.
Step-by-step solution:
- AUM Component: $750,000 × 0.0085 = $6,375
- Flat Fee Component: $1,500
- Hourly Component: 4 × $200 = $800
- Total Annual Cost: $6,375 + $1,500 + $800 = $8,675
- Effective Rate: ($8,675 / $750,000) = 1.157%
Common Questions
Is 1% a high fee for a financial advisor?
1% is the industry benchmark for portfolios between $500,000 and $1,000,000. However, for portfolios over $2 million, you should expect to see tiered pricing (graduated fees) that bring the average cost below 0.75%. Use the financial advisor cost calculator to see how small changes in percentage affect your dollar total.
What is a fee-only advisor?
Fee-only advisors are paid directly by the client and do not accept commissions for selling financial products. This model reduces conflicts of interest. In contrast, "fee-based" advisors may charge a fee and also earn commissions from insurance or mutual fund companies.
Can advisor fees be tax-deductible?
Under the Tax Cuts and Jobs Act of 2017, miscellaneous itemized deductions (including investment management fees) are no longer deductible for federal taxes for most individuals. However, fees paid directly from a traditional IRA account are paid with pre-tax dollars, which effectively provides a tax benefit.