Advisory fees
What a 1% Fee Costs Over a Retirement
A fee of 1% of assets sounds modest. On a $2 million portfolio it is about $20,000 in the first year and, over thirty years, a portfolio roughly $1.5 million smaller. That can still be money well spent; the point is to know what you pay and what you get for it. Here are the numbers for $1 million to $3 million, with every assumption stated.
First-year fee on $2M at 1%
$20,300
Charged whether markets rise or fall
Fees paid over 30 years
$545,000
$2M portfolio, age 65 to 95
Smaller portfolio at 95
$1.5M
Fees plus the growth they would have earned
How much does a 1% fee cost on a $1M to $3M portfolio?
Over a 30-year retirement, a 1% advisory fee takes about 27% of the starting balance in direct fees and leaves the portfolio at 95 about 60% smaller than the same plan without it. The cost scales with the balance: the larger the portfolio, the larger the dollar fee for the same work.
The table follows three hypothetical retirees who stop working at 65 and draw 4% of their starting balance in the first year, raising the withdrawal with inflation each year after. Everything is identical between the two columns except the 1% fee.
| Portfolio at 65 | Fee in year 1 | Fees paid, 65 to 95 | Left at 95, with 1% fee | Left at 95, no fee | Difference |
|---|---|---|---|---|---|
| $1,000,000 | $10,200 | $272,000 | $489,000 | $1,241,000 | $751,000 |
| $2,000,000 | $20,300 | $545,000 | $978,000 | $2,481,000 | $1,503,000 |
| $3,000,000 | $30,500 | $817,000 | $1,468,000 | $3,722,000 | $2,254,000 |
Assumptions behind every figure on this page
- Retirement starts at 65 and runs 30 years, to 95.
- First-year withdrawal is 4% of the starting balance, taken at the start of each year and raised 2.5% a year for inflation.
- The portfolio earns 6.0% a year before costs, every year (no market sequence; a bad first decade would make every gap larger in relative terms).
- Fund expenses of 0.10% a year apply in both columns. The advisory fee is charged on the year-end balance.
- Taxes are ignored. Figures are nominal and rounded; divide by about 2.1 to see them in today's dollars at 2.5% inflation.
- These are hypothetical illustrations, not forecasts or advice.
Why is the lost balance larger than the fees paid?
Because each fee payment stops compounding the day it leaves the account. On the $2 million portfolio the fees paid total about $545,000, but the ending balance is about $1.5 million lower: the other $958,000 is growth those fees would have earned between the year they were charged and age 95.
That money does not vanish from your family's point of view only at the end. It is the cushion that would have absorbed a long bear market, a large long-term-care bill or a decision to help a grandchild with a house. It is also, for many readers, most of what would have gone to heirs.
How much less can you spend each year?
Roughly 12% less. If you instead spend the portfolio down to zero over the same 30 years, a 1% fee lowers the inflation-adjusted income it can pay by about $6,000 a year per $1 million.
| Portfolio at 65 | Fund costs only | With 1% advisory fee |
|---|---|---|
| $1,000,000 | $51,400 | $45,400 |
| $2,000,000 | $102,900 | $90,800 |
| $3,000,000 | $154,300 | $136,100 |
How do different fee levels compare on $2 million?
Each quarter point matters. On a $2 million retirement portfolio, every 0.25% of annual fee costs between roughly $280,000 and $430,000 of ending balance over 30 years in this model.
| Annual advisory fee | Fees paid | Left at 95 | Less than with no fee |
|---|---|---|---|
| 0.25% | $167,000 | $2,052,000 | $429,000 |
| 0.50% | $313,000 | $1,660,000 | $821,000 |
| 0.75% | $438,000 | $1,304,000 | $1,178,000 |
| 1.00% | $545,000 | $978,000 | $1,503,000 |
| 1.50% | $710,000 | $415,000 | $2,066,000 |
Does a tiered fee schedule solve it?
It helps, but less than the schedule suggests, because a retiree's balance moves down into the most expensive tier.
Many advisers charge a lower rate on assets above a breakpoint. Take a common shape: 1% on the first $1 million, 0.75% on the next $2 million, 0.50% above that. On $2 million the first-year fee drops from about $20,300 to about $17,800, a blended rate under 0.9%. But a retiree is spending the portfolio. In our model the $2 million balance is about $1.1 million by 95, and nearly all of it is then charged at the top rate. Over 30 years the tiered schedule saves about $47,000 of fees on $2 million, and the portfolio still ends about $1.35 million smaller than with no advisory fee.
| Portfolio at 65 | Fee in year 1 | Fees paid, 65 to 95 | Less at 95, tiered | Less at 95, flat 1% |
|---|---|---|---|---|
| $2,000,000 | $17,800 | $498,000 | $1,347,000 | $1,503,000 |
| $3,000,000 | $25,300 | $714,000 | $1,921,000 | $2,254,000 |
Where do you find what you actually pay?
In the firm's disclosures and on your statements. Add up four layers, not one.
- The relationship summary. Registered investment advisers and broker-dealers must give retail clients a short Form CRS describing their services, fees and conflicts of interest (Investor.gov).
- The ADV brochure. Form ADV Part 2A sets out the fee schedule, breakpoints and how fees are billed. Search the firm at adviserinfo.sec.gov, which also shows any disciplinary history.
- The custodian statement. The advisory fee is usually debited quarterly. Add up the four debits for the year; that is the number to compare with the value you received.
- The products. Fund expense ratios come out of returns and never appear as a line item. Variable annuities and some insurance products carry their own annual charges on top.
Check, too, which assets the fee is charged on. Some firms bill on cash held in the account, on bond ladders that need little management, or on accounts at other firms that they report on but do not run.
What do the alternatives cost?
Fund costs alone can be a fraction of an advisory fee. Morningstar's annual fee study put the asset-weighted average expense ratio across U.S. mutual funds and ETFs at 0.32% in 2025, and broad index funds cost far less than that average (Morningstar, 2026).
Advice itself comes in three shapes. A percentage of assets rises with your balance whether or not the work does. A flat annual retainer or an hourly engagement with a fee-only planner prices the work instead. And some readers handle it all themselves, which costs time rather than money. Our guide on how to choose a fee-only financial advisor explains how to verify an adviser and what to ask.
None of this says an adviser is never worth it. It says the price should be stated in dollars and weighed against what you get: tax planning that pays for itself, help with a Social Security or pension decision you only make once, or someone to manage the money if you no longer want to. A fee-only planner, an hourly CPA or a flat-fee review can be very good value. Whoever you work with, going in with your own numbers lets you ask better questions and check the answers.
Questions to ask any adviser
- What will I pay this year in dollars, including fund expenses and any product commissions?
- Are you a fiduciary at all times, for every account you advise on?
- What tax planning is included: Roth conversions, withdrawal order, IRMAA, charitable giving?
- Would you do this work for a flat fee instead of a percentage?
Before your next review
- Write last year's total cost in dollars: advisory fee, fund expenses and product charges.
- List what you received for it: tax planning, Social Security or pension analysis, estate coordination.
- Check whether the fee is charged on cash or on accounts the adviser does not manage.
- Ask whether a lower tier, a flat retainer or an hourly arrangement is available for the same work.
Frequently asked questions
How much does a 1% advisory fee cost on a $2 million retirement portfolio?
About $20,300 in the first year and roughly $545,000 over a 30-year retirement, in our model (6% gross return, 0.10% fund costs, 4% initial withdrawal rising 2.5% a year). Because the money paid in fees also stops compounding, the portfolio at 95 ends about $1.5 million smaller than the same plan without the fee.
Why is the lost balance larger than the fees paid?
Every dollar paid as a fee is a dollar that no longer earns a return for the rest of the retirement. A fee paid at 66 would have compounded for 29 more years. The fees paid are the visible cost; the smaller ending balance is the full cost.
How much less can you spend each year with a 1% fee?
In our model, a $2 million portfolio could support about $102,900 a year, rising with inflation, for 30 years with fund costs alone. With a 1% advisory fee on top, the same portfolio supports about $90,800. That is roughly $12,100 a year, every year, before any other difference in advice.
Is a 1% fee ever worth paying?
It can be, if the adviser delivers something you would not do yourself and that is worth more than the fee: tax planning that saves more than it costs, behavioral discipline in a bad market, or handling the finances for a spouse who does not want to. The test is whether you can name the value in dollars. Ask for the fee in dollars, not as a percentage, and compare it with a flat-fee or hourly planner for the same work.
Does a tiered fee schedule make a big difference?
Less than it seems for a retiree. A common schedule of 1% on the first $1 million and 0.75% on the next $2 million cuts the fees on a $2 million portfolio from about $545,000 to about $498,000 over 30 years in our model. As you withdraw, the balance shrinks and more of it falls into the 1% tier, so the blended rate rises with age. Ask for your blended rate in dollars each year.
Where can I see exactly what my adviser charges?
In three places. The firm's relationship summary, Form CRS, describes its fees and conflicts in a few pages. Its Form ADV Part 2A brochure, searchable at adviserinfo.sec.gov, sets out the fee schedule. Your custodian statements show the advisory fee actually debited each quarter. Add the expense ratios of the funds you hold, and any charges inside annuities or insurance products, to get the full cost.
What are the alternatives to paying a percentage of assets?
Flat-fee and hourly fee-only planners charge for the plan rather than the portfolio size, so the cost does not rise as your balance grows. Many families keep a CPA for taxes and add a flat-fee or hourly planner for the big, irreversible choices, such as when to claim Social Security or whether to take a pension lump sum. Others manage the portfolio in low-cost index funds themselves. Whichever you choose, understanding the numbers yourself makes any adviser's work easier to judge.
Know what you pay, and what you get
Put your balance and your adviser's fee into the fee calculator, and take the result to your next review. Our free newsletter sends new guides and calculators, and the year's numbers when they change, for people near or in retirement.