Are You Overpaying for Financial Advice?

It’s no secret that financial advice can be expensive. Many clients pay around 1% of their assets each year for an advisor’s help. While that might sound small, it adds up quickly to approximately $5,000 a year on a $500,000 portfolio or $10,000 on a $1 million portfolio.

When you’re paying that much, how can you tell whether you’re truly getting value for your money? In this article, we’ll break down how to evaluate an advisor’s worth, spot signs you might be overpaying, and understand when higher fees can actually make sense.

Average Cost of Financial Advice

The cost of financial advice can vary significantly. There are, however, industry standards you can use as benchmarks for what a given advisor’s fee structure should cost. Below is a short breakdown of what to expect:

Fee Structure	How It Works	Typical Range
Assets Under Management (AUM)	You pay a percentage of your total invested assets each year.	~1% annually on the first $1M (often decreases on higher AUM)
Hourly Rate	You pay per hour for specific advice or financial planning.	$150 – $400 per hour
Flat / Retainer Fee	A set amount paid monthly or annually for a defined set of services.	$2,000 – $10,000 per year, depending on client needs
Commission-Based	The advisor earns commissions when selling products like mutual funds, annuities, or insurance.	Varies by product and provider

What Your Costs Include

When you pay a financial advisor fee, it can be hard to wrap your mind around what you’re getting in return. Your annual, quarterly, or monthly payments often include a layer of costs, including some that go directly toward your plan and others that cover firm operations or third-party products.

Below is a snapshot of what often makes up an advisory fee, which you see expressed as a percentage or flat cost:

• Advisor time and expertise: Covers plan creation, portfolio reviews, and communication. If meetings or updates are rare, you may not be getting full value.
• Investment management: Includes portfolio construction and monitoring. Fund expense ratios, however, are separate and can increase your overall costs.
• Administrative and platform costs: Custodial and tech expenses may be bundled in as a wrap fee or charged separately. It’s important to always ask or look for a breakdown from the firm.
• Firm overhead: Some of what you pay supports office operations, staff, and marketing, which don’t directly add value to your plan.
• Product or fund expenses: Mutual funds, ETFs, or annuities tend to carry internal costs, which can push your overall fee even higher.

Always take the time to review a financial advisor firm’s documentation, whether it be an invoice, a relationship summary brochure, or Form ADV. This can help you get an idea of what you’re paying for if you’re unsure. In any case where you’re unsure or find it difficult to read the documents, ask the advisor directly about costs and what they include.

Specifically, Jason Steeno, president of CoreCap Investments and CoreCap Advisors, recommends clients “ask about the types of accounts [advisors] use, wrap or non-wrap.” A wrap account includes many additional costs in your overall fee, including custodial and transaction expenses associated with investment management. With non-wrap, you’ll have to pay for those separately, but it may be beneficial if “an advisor trades infrequently,” says Steeno.

Signs You’re Overpaying

Even if your advisor’s fee looks reasonable on paper, the value you receive should always match what you’re paying for. Unfortunately, this may not always be the case. Knowing how to spot warning signs of inadequate service is critical to getting the best value for your money.

Here are six signs your costs might be higher than the value provided:

1. Contact with your advisor is rare. If you only hear from your advisor once a year or receive generic updates, you may not be getting the attention or ongoing planning that a full-service fee should cover.
2. Your portfolio feels cookie-cutter. Limited customization can signal you’re paying premium prices for basic management, especially if you’re a high-net-worth client with more substantial needs.
3. You’re charged excessive transaction costs or hidden fees. Some firms add trading, custodial, or product fees on top of their advisory cost. Ask for a full breakdown of all charges to confirm what you’re paying for.
4. Your fees haven’t changed as your assets grow. Many advisors use tiered pricing, where your percentage drops as your portfolio increases. If your rate hasn’t adjusted, you might be overpaying relative to peers.
5. You’re not receiving comprehensive service. If you’re paying for holistic financial planning but only getting investment management or basic recommendations, you may not be getting what you initially intended.
6. Your fee is out of line with industry standards. While every advisor sets pricing differently, be sure they’re falling at or close to industry standards similar to those listed above. If not, you may be overpaying for the same service you could get elsewhere.

In terms of an advisor’s short- or long-term performance, it’s more difficult to judge value. Steeno recommends judging an advisor during difficult market conditions, rather than a bull market. Seeing how a professional helps you when times get tough, both in terms of advice and investment performance, can be a telling sign of much value you are or aren’t getting.

“There’s a saying in the industry that goes something like, ‘Advisors earn their fee in down and sideways markets,’” he says. “I’d suggest looking at how your advisor performs when it’s not ‘easy’ to obtain outsized performance.”

Overall, however, the exact value you’re getting out of an advisor can be subjective and “nebulous,” as Steeno describes. As the client, it’s up to you to pay close attention to what you’re getting out of the relationship and make a judgment call.

When Higher Fees May Be Worth It

While it isn’t ideal, a higher-than-average financial advisor fee doesn’t always mean you’re overpaying. Some situations, such as superior service or performance, may make a more expensive rate worth it. The key is for you to understand why you’re paying more so you can decide if it’s beneficial in the long-term.

You may need to pay more if your financial life is complex or your net worth is higher. Clients who own businesses, manage multiple accounts, or require estate planning or tax strategy often need more time and attention from their advisor. That extra coordination and analysis can justify a higher fee when it leads to better organization and fewer costly mistakes.

Confidence in your advisor may also carry significant weight. You may be willing to pay more for an advisor you trust or who communicates clearly and demonstrates steady judgment over time. When your advisor consistently helps you make better decisions and deal with uncertainty, they’re an invaluable asset.

How to Lower Your Financial Advisor Costs

If you suspect you’re paying more than you should for financial advice, there are several steps you can take to lower your costs. These can range from negotiating costs to dropping your financial advisor entirely.

The first, and most logical step, is to carefully review an itemized breakdown of your services and accompanying costs. Pay close attention to the firm’s Form ADV Brochure 2A and Client Relationship Summary (CRS) to see what their fee structure and compensation look like. From there, you can match it up to what you’re paying and be able to see what’s driving your rate up.

Next, if your financial advisor allows for it, you may be able to negotiate your price down. This may not always work, but it can be helpful, especially if you feel you’re paying for services you don’t need. For instance, if you only need investment management services, paying for financial planning doesn’t make sense.

You might also find that an AUM-based fee structure doesn’t fit your needs. In this case, switching to a flat-fee, such as hourly or for a specific project, may help you save money on ongoing costs.

Finally, Steeno recommends shopping around to find the best firm and professional for your needs. “Leverage your personal network of friends and family to see how they feel about their advisor, the fees they pay, and the services they receive.” Then, once you’ve “gathered all the data you can,” you can “determine if it’s time to make a change or negotiate your current fee with your advisor,” he says.

Frequently Asked Questions

Is a 1% advisor fee too high?

A 1% fee isn’t necessarily a high number. This is an industry standard percentage for portfolios near or below $1 million. However, it’s important to judge the fee based on the overall perceived value you’re getting in return.

If you’re receiving regular communication and well-performing services, a 1% fee is likely worth it. On the other hand, with basic investment management or lackluster advice, you may be overpaying.

Are flat-fee advisors cheaper?

Flat-fee advisors, while charging a lot for their time, may be cheaper in the long run if you only need limited services. Paying an advisor for a one-off or occasional appointment to get financial advice may be the ideal choice if you don’t need ongoing assistance or discretionary investment management.

Can you negotiate financial advisor fees?

In many cases, yes. Advisors often have flexibility, especially if your assets have grown or if you’re not using all of the services they provide. It’s entirely appropriate to ask whether a lower rate or tiered pricing could apply to your account.

It’s important, though, to be professional and courteous when you speak with your advisor. Go into the meeting knowing what fees you want to lower and why.