I Have $2.2 Million Invested With My Advisor Who Charges a 1% Fee. Am I Paying Too Much?

When it comes to advisor fees, there are two numbers to keep in mind: 1% and 0.02%. The first is the average fee that financial advisors tend to charge. If you are looking for comprehensive financial management, in general you should expect to pay about 1%. The second is a representative fee for a well-indexed S&P 500 fund. If you are only looking for investment management, someone to grow your portfolio, this is the number they need to compete with.

If you’re interested in exploring how a financial advisor can help you, you can speak to a fiduciary advisor for free.

How Are Advisor Fees Structured?

Financial advisors can charge for their services in several different ways, and understanding these fee models is key to knowing whether you’re paying a fair price. The most common approach, especially among traditional advisors, is the assets under management (AUM) model, where you pay a percentage of your invested assets each year. For example, a 1% annual fee on $2.2 million means you’d pay about $22,000 per year, typically deducted directly from your account.

Some advisors use a flat fee or retainer model, charging a set amount each year or quarter for ongoing financial planning and investment management. Others bill by the hour, similar to an attorney or consultant, which can be more cost-effective for clients who only need occasional advice. These alternatives can help investors with large portfolios avoid paying rising fees as their assets grow.

In contrast, some advisors, especially brokers or insurance representatives, earn commissions when they sell investment products like mutual funds or annuities. While this structure can seem less costly upfront, it can create potential conflicts of interest if advisors are incentivized to recommend certain products over others.

A growing number of professionals now use hybrid models, combining AUM fees with flat or hourly charges, or offer “fee-only” advice where all compensation comes directly from the client rather than product sales. Fee-only advisors are often preferred for their transparency and fiduciary obligation to act solely in your best interest.

Ultimately, advisor fees are at the discretion of the advisor, their firm and you. You and your advisor should get an understanding of your goals and personal circumstances, and then you can negotiate the fee structure. If you’re thinking about using a financial advisor, you can speak to one for free.

What Should You Pay?

So how much should you pay for financial services? Specifically, is a 1% management fee too high for someone with more than $2 million on deposit? Well… it depends.

The simple answer to this question is, more or less, no. Given the size of this account, you might be able to shop around for a discount. But in general, a 1% management fee is right in line with market averages. Typical financial advisors might charge between about 0.5% on the lower end and 2% on the higher end, but 1% is not unusual.

The more complicated issue is, are you getting your money’s worth? As the SEC notes on this subject, management fees might sound small, but they can add up quickly over time. To put this in perspective, say that you put your $2.2 million money into average return of around 8%. Over 10 years, with a 1% AUM, you would pay about $250,000 total over time in management fees.

It’s possible that this fee may end up paying for itself with active portfolio management if your advisor can outperform the market. By contrast, you could bought an S&P 500 index fund. Those tend to cost about 0.02% per year. The benefit is that it’s a cheaper. The disadvantage is that you may be missing out on professional insight and management that could benefit your portfolio and beyond.

If your financial advisor is simply making investments on your behalf and not actively managing your portfolio, then, there’s a good chance that your 1% fee isn’t really worth it. However, a good financial planner isn’t solely limited to investment management, depending on the scope of your agreement, and they can be providing value elsewhere.

Look to the other services your financial advisor offers. Do they help with long term planning? Are they giving your advice to build both general and targeted wealth? Do they offer tax services, estate planning and other advice? Basically, do they offer something besides making investments on your behalf?

This is the critical issue when it comes to whether your 1% fee is too high. Fee differences very rarely lead to better portfolio returns, since it’s quite rare for professionals to ever beat the market. So instead, look at what you want out of this relationship in total. If you feel like you have received sound advice across a broad range of financial planning, security and services, then this sounds like a strong professional relationship at a fair price.

What Services Do Financial Advisors Provide?

A financial advisor is someone who helps you manage your money and other assets. Among other services, a financial advisor can help clients with:

Investment or portfolio management
Long-term financial planning
Tax advice and preparation
Budgeting and financial goals

The exact nature of your relationship with a financial advisor will depend on their services and your needs. For example, some may work literally only in an advisor capacity. In this case, the financial advisor will not help you with any actual transactions, but will only give advice about what you should do.

Other advisors may work on a more comprehensive basis. They may offer accounting services and tax preparation, say. Or they may offer portfolio and asset management, actively holding your money on account and making investment decisions on your behalf.

When you seek out a financial advisor, it’s important to look for someone who fits your needs. You don’t want to pay for unnecessary services; for example, most households have simple taxes and don’t need professional preparation. On the other hand, you don’t want a relationship that doesn’t achieve all of your goals either.

Bottom Line

A 1% advisor fee can be reasonable for some investors, but expensive for others, depending on the services provided. If your advisor offers comprehensive financial planning, tax strategies, estate guidance and ongoing portfolio management, that fee may be justified. However, with $2.2 million invested, even small percentage differences add up to tens of thousands of dollars each year. It’s worth asking your advisor to clearly outline what you’re getting for that cost and comparing it with fee-only or flat-fee advisors who may offer similar services for less. Ultimately, the goal is to ensure your fees reflect real value and align with your long-term financial success.

Tips On Finding A Great Financial Advisor

A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
One of the biggest problems with all professional services, from law and medicine to finance, is figuring out what even makes someone good at their job. After all, how can you know if someone is a good financial advisor until after you’ve already given them all your money? Here’s how.