A 1% assets-under-management fee sounds trivial and is not. On a $750,000 portfolio held for 25 years it can quietly consume over $400,000 in fees and lost compounding โ often more than the advisor adds. This calculator compares AUM, flat-fee, hourly and retainer models on the same portfolio so you can see the true lifetime cost of each.
| Model | Typical Cost | Best For | Conflict of Interest |
|---|---|---|---|
| AUM percentage | 0.50%โ1.50% of assets / yr | Portfolios $500k+ with ongoing management | Fee rises with assets even if work does not |
| Flat annual fee | $3,000โ$18,000 / yr | Larger portfolios, steady-state planning | Lowest โ decoupled from asset level |
| Hourly | $200โ$500 / hr | One-time plans, second opinions, DIY investors | Low, though hours can inflate |
| Retainer | $1,500โ$7,500 / yr | Younger clients building wealth | Low โ flat scope, flat price |
| Subscription | $100โ$500 / month | Simple situations, no complex planning | Low โ transparent and cancellable |
| Commission-based | "Free" โ paid by product | Rarely appropriate | High โ incentivizes product sales |
Two separate losses compound. First, the fee itself: 1% of $750,000 is $7,500 in year one. Second โ and larger โ the growth that the fee dollars would have earned. A dollar paid in fees at age 45 is not a dollar lost; it is roughly $7.60 lost by age 70 at 7% growth. Over 25 years that compounding loss typically doubles the nominal fee total.
This is why the flat-fee model has grown: the advisor's work scales with complexity, not with the market's performance. A client with $2,000,000 pays the same $6,000 flat fee as a client with $600,000 โ an effective rate of 0.30% versus 1.00%.
| Portfolio Size | Typical AUM Fee | Effective Flat-Fee Equivalent |
|---|---|---|
| Under $250,000 | 1.00%โ1.50% | Flat models often not offered |
| $250,000โ$500,000 | 1.00%โ1.25% | $3,000โ$6,000 / yr |
| $500,000โ$1,000,000 | 0.80%โ1.10% | $5,000โ$9,000 / yr |
| $1Mโ$3M | 0.70%โ1.00% | $7,500โ$15,000 / yr |
| Over $3M | 0.50%โ0.85% | Negotiated โ often under $20,000 |
Break-even analysis is the practical takeaway. Dividends and interest paid by the portfolio are not reduced by the flat fee, so the flat model wins at every portfolio size above roughly $600,000 at a $6,000 fee. Below that threshold the AUM model can be cheaper in absolute dollars even though the rate looks higher.
This is where the AUM-versus-flat decision has the largest dollar consequence, often six figures over a retirement horizon.
Already with an AUM advisor? The calculator shows what the alternative model would have cost on the same portfolio.
Fees matter most in the decade before and after retirement, when withdrawal sequencing compounds the drag.
Confirm your advisor is fee-only and a fiduciary. A commission model hides its cost in the product rather than the statement.
Fee-only advisors typically charge 0.50% to 1.50% of assets under management, with 1.00% being the most common rate for portfolios under $1 million. Flat annual fees commonly run $3,000 to $18,000, hourly planning is $200 to $500 per hour, and monthly subscription models cost $100 to $500.
It depends on what the advisor actually does for you. A 1% fee on a simple three-fund portfolio is difficult to justify against a 0.25% robo-advisor. On a complex situation involving tax planning, Roth conversions, withdrawal sequencing and estate coordination, the value can exceed the fee. The calculator shows your specific number rather than a general answer.
Fee-only means the advisor is compensated exclusively by client fees, with no commissions from products. Fee-based is a marketing term describing an advisor who charges fees but may also receive commissions. Fee-only is the stronger standard because compensation cannot shift based on what gets sold to you.
Ask directly in writing and check the Form ADV. A registered investment adviser owes a fiduciary duty at all times. If your advisor is registered as a broker-dealer representative, they generally operate under a suitability standard, which permits recommendations that are adequate but not necessarily in your best interest.
If your portfolio is above roughly $600,000 and your planning needs are relatively stable, the flat-fee model usually costs substantially less over a long horizon. The calculator above shows the lifetime difference on your numbers. Before switching, confirm there is no surrender charge, no tax consequence, and no service you actually rely on that the new model does not provide.
No. The advisory fee is separate from the expense ratios of the funds the advisor selects, and separately from any platform or custodial charges. The combined figure is your true cost. Ask for it in writing โ advisors are required to disclose compensation, and a candid advisor will total it without hesitation.
โ ๏ธ Important Note: This calculator models fee costs based on the assumptions you enter and does not project actual investment results. Past returns do not predict future results, and no advisory fee guarantees better performance or any specific outcome. Fee schedules, breakpoints and minimums vary by firm and are frequently negotiable. Verify every figure in the advisor's Form ADV Part 2A before making a decision.