Is a 1% Financial Advisor Fee Worth It?

Financial advisors use diverse fee structures, but one of the most common is the 1% fee. Often quoted as an industry standard, this falls squarely within a typical range of a percentage of the dollar amount of assets under management (AUM) that an advisor will take home for their expertise and guidance. While popular and common, it’s not always the best option for the client or the professional.

In this article, we’ll offer an analysis of the 1% fee and a look at why it’s so widespread. Additionally, we’ll discuss what it includes and the value for money you can get out of it as a client, especially as your wealth scales. Finally, we’ll discuss whether it’s worth it, using the perspective of financial advisors on both sides of the debate.

What Is the 1% Fee, and Why Is It Common?

A typical way financial advisors charge clients is through an assets under management (AUM) fee model, which involves paying a percentage of the value of assets they manage on a quarterly or monthly basis. While that fee can vary based on needs, management style, and net worth, the 1% mark—usually presented as an annual percentage—has become recognized as an “industry standard.”

So, what does that look like in practice? “If your advisor is charging a 1% AUM fee on a $500,000 portfolio, that’s $5,000 a year,” says Stoy Hall, CFP^®, founder and CEO at Black Mammoth. Taking a chunk of that size out of your portfolio may seem like a lot—and it can be—but it often includes a range of services and access to professional expertise.

 “The real question is: are you getting $5,000 worth of value, or are you just paying for basic investment management that a robo-advisor could do for 0.25%?” Hall points out. “That 1% fee should buy you a full suite of services — ongoing tax strategy, estate planning coordination, business or cash flow planning, insurance audits, retirement optimization, and behavioral coaching. Investment management should be the floor, not the ceiling.”

The AUM fee model—and especially one at a flat 1%—is popular because of its efficiency and simplicity. It can align with your portfolio size and incentivize the advisor to grow your wealth, serving as a middle point in the larger spectrum of AUM percentages (anywhere from 0.5% to 1.5%). But as Hall alludes, while that percentage can include much more than just portfolio management, it’s not a guarantee. Therefore, it isn’t always clear that the value exists for the client, namely as their assets increase.

What Do You Get for the 1% AUM?

A 1% AUM advisory fee can encompass a wide range of services. It might, for instance, cover anything from discretionary investment management to planning for goals such as retirement or purchasing a home. However, there isn’t necessarily a standard across all firms—large or small—and it will be up to you to assess the value you’ll receive.

Trying to pin down what 1% will get you “is a bit like asking how much food $100 buys,” observes Sam Flaten, CFP^®, ChFC^®, Director of Planning at Narrow Road Financial Planning. “At a discount grocer like Aldi, you can probably eat for a week,” but “[at] a high-end steakhouse, you might barely cover a meal.” In the end, he adds that “the services you receive for 1% depend enormously on the firm.”

So, what types of services may—or may not—be included in a 1% price point? Here are some examples:

• Investment management and portfolio rebalancing
• Personalized financial plans, sometimes with regular updating and check-ins
• Behavioral financial coaching
• Tax planning
• Estate planning
• Coordination with other professionals, such as accountants or attorneys

“Some firms offer a ‘buffet’” that bundles some or all of the above, says Flaten. “On the other hand, highly specialized firms, like a boutique retirement-focused practice, might charge 1% but offer expertise that’s genuinely transformative for a retiree’s life trajectory.”

Sometimes, a 1% fee could provide a full-service experience with a firm or professional, receiving help with various areas of your financial picture. But that doesn’t mean it’s always the best bang for your buck. You may pay for access to services you don’t need or fully use. Flaten also underlines that “when you see that much breadth under one fee, you have to wonder about the depth of expertise in any single area.”

An understanding of what’s in a financial advisor’s 1% fee and whether it aligns with your needs and goals is vital. Flaten suggests asking, “’Am I getting specialization and excellence, or just a long list of offerings?’” As he puts it, “The true value isn’t how many things are listed — it’s how well they’re executed.”

Before committing to payment terms with an advisor, consider scheduling an introductory consultation or researching them online. You can also look them up on the SEC’s Investment Adviser Public Disclosure (IAPD) website and review their Form ADV brochure, which outlines information about a firm or professional’s fees, services, and compensation.

How Does the 1% Fee Scale With Wealth?

A common question surrounding the 1% fee is whether it scales appropriately as your wealth grows. If you have a larger portfolio, that percentage—which may already feel high—can become a significant amount of your asset value deducted each year. For example, is paying $10,000 annually on a $1 million portfolio justifiable if you’re not getting the right value?

AUM fees at around 1% can scale “[very] quickly,” cautions Carson McLean, CFP^®, founder of Altruist Wealth Management. “Most firms use tiered AUM schedules, but the total cost is still massive.” He offers this example: “At $1.5 million, the average advisory fee is around 0.94%—that’s $14,100 a year. At $5 million, the average is 0.84%—that’s $42,000 a year. The complexity does not triple from one client to the next. The cost does. And that’s the problem.”

To address this, financial advisors use tiered fee structures that decrease as portfolios become more valuable. For instance, you might pay 1% on your first $1 million, then 0.75% on the next million. In turn, this rewards you for remaining with your advisor and can ensure the fee stays aligned with the scope of services you receive.

“At a certain point, the flat 1% fee structure stops making economic sense. That’s why most firms introduce breakpoints as assets rise,” Flaten explains. He adds, however, that “many people miss an important nuance: the value of financial advice can scale dramatically with wealth.”

As your net worth increases, so can the challenges. High-net-worth clients often demand more than investment management alone, including advice and hands-on help with complex topics like charitable giving, estate and legacy planning, and tax optimization.

But the question remains—is the fee proportional to the value? For wealthy individuals and especially “ultra-high-net-worth clients, a simple percentage-based fee may not reflect the work being done — either it overpays the advisor or undercompensates them if the relationship becomes more complex,” Flaten says. If you’re unsure, it might be time to talk to your advisor about other options such as a flat-fee or a tiered model.

Is the 1% Fee Really Worth It? It Depends

Deciding whether a 1% AUM fee is worth it begins with a critical question: are you getting enough value for the cost? For some clients, the answer is a clear yes, especially if their advisor offers a wide array of services such as comprehensive planning, tax strategies, and investment management. But for others, the fee can quietly erode their portfolio value, outpace actual needs, and fail to reflect the complexity of their situation.

“Most clients are told they’re getting investment management, planning, and advice, but often the real deliverable is just portfolio oversight and quarterly check-ins,” says McLean. “For $10,000 or $20,000 a year, that’s a bad deal unless the advisor is integrating taxes, estate planning, behavioral coaching, and real decision-making support.”

The 1% fee can be a worthwhile starting point if the advisor offers the services and expertise you require, such as ongoing portfolio oversight and personalized guidance. However, this also exposes a fundamental flaw of the flat percentage—that it’s not necessarily connected to the complexity of your needs but rather the size of your portfolio.

“Great advisors can add a lot of value. But that value has very little to do with how much money someone has invested,” McLean explains. “Good planning doesn’t cost more just because someone has $3 million instead of $1 million. In fact, tying compensation to portfolio size can misalign incentives and distract from real planning work.”

It’s helpful to visualize what you’ll receive to understand if the cost matches the benefit. After researching services, Hall recommends the following method of checking value:

My advice is simple: calculate your total cost (fee percentage × portfolio value), then write down exactly what you’re getting in return. If all you see is portfolio rebalancing and a quarterly call, you’re overpaying.

Ultimately, a 1% fee isn’t always too much or too little. It depends on the situation, advisor, and what matters to your financial plans. Ensure you understand what you’re paying for, how often you get the advice or help you need, and whether you can get the same advice at a lower cost or a more efficient fee model.