TL;DR
Financial advisorsoften get flak for their fees, especially when they charge based on assets under management (AUM). But when you look past investment management and consider services like tax planning, entity structuring, estate setup, and major life event support, the real value becomes clear. This post breaks down the numbers, tradeoffs, and how to decide if an advisor is worth it for you.
Are Financial Advisors Overpriced?
I’ve spoken with nearly 100financial advisorsover the years. Here’s the truth:
They’re not trying to scam you.
Whether it’s flat fee, hourly, or a percentage of assets under management (AUM), most fee structures shake out to similar pricing. They just wear different disguises to make the cost feel more palatable.
What Is an AUM Fee, Really?
AUM-based pricing means your advisor takes a percentage of the money they manage for you. While 1% is a commonly cited average, it actually ranges:
- 0.25% to 0.5%for roboadvisors likeBettermentorWealthfront
- 0.3% to 1.8%for human advisors, depending on portfolio size, services, and firm structure
Let’s say you have a $400,000 portfolio and work with an advisor charging 0.85%:
- That’s $3,400/year in fees
- Over 12 years with 7.5% annual returns, you’ll pay ~$61,000 total (including missed compounding)
Is that a lot? Maybe. But only if you think investment management is all you’re paying for.
What Financial Advisors Actually Do (Beyond Investments)
Here’s the stuff high-quality advisors handleon topof portfolio allocation:
1. Strategic Tax Planning
- Optimize tax brackets
- Minimize capital gains
- Maximize retirement deductions (401(k), SEP IRA, QBI, etc.)
2. Entity Setup & Optimization
- Help structure your business as an LLC, S-Corp, or C-Corp
- Coordinate with CPAs and legal teams
- Align your business structure with long-term goals
3. Trust & Estate Planning
- Establish revocable, irrevocable, or grantor trusts
- Plan for generational wealth transfer
- Reduce estate taxes and probate exposure
4. Risk & Insurance Management
- Evaluate gaps in your life, disability, umbrella, and business insurance
- Structure coverage to reduce liability and preserve wealth
5. Retirement & Cash Flow Modeling
- Build out goal-based plans (early retirement, college, house)
- Adjust strategies during life events or market volatility
6. Behavioral Coaching
- Talk you off the ledge during market crashes
- Prevent FOMO decisions when stocks surge
7. Support During Life Transitions
- Inheritance planning
- Divorce strategy
- Aging parents or special needs planning
- M&A/exits coordination
DIY vs. Robo vs. Full Advisor
You could DIY. Or use a robo. But consider this:
You’re running a $10M SaaS startup. You’ve got 20 employees. A spouse. Two kids. Aging parents. Siblings. Maybe even a dog.
Time is your most valuable asset.
Rebalancing your portfolio? Digging through IRS code for capital gain exclusions? Deciding if a CRUT makes sense for your estate plan?
That’s time you could spend elsewhere.
Let’s break down your options:
DIY
Cost:Free (kinda)
Pros:Full control
Cons:High time cost, high risk of missing tax/legal nuances
Best For:Confident, detail-oriented individuals with time to spare
Robo (Betterment, Wealthfront)
Cost:0.25%
Pros:Low-cost, automation
Cons:No planning, tax help, or real strategy
Best For:Those with simple finances looking for low-cost passive investing
Cost:0.3% – 1.8%
Pros:Personalized, comprehensive
Cons:Higher upfront cost
Best For:Business owners, high earners, or those with complex financial lives
So… Are Advisors Worth It?
It depends on your needs and how you value:
- Time
- Peace of mind
- Tax savings
- Avoiding big mistakes
Advisors aren’t "cheap", but good ones create ROI far beyond the fee.
Instead of asking:"Is 1% too much?"
Ask:
- “What am I getting for what I pay?”
- “Does this free me up to focus on what matters?”
- “Do I have the expertise, or do I want someone who does?”
FAQs
Q: Can I just hire a CPA instead of a financial advisor?
A: CPAs are great for taxes, but they often don’t offer proactive planning or holistic financial strategy.
Q: What’s the difference between a fiduciary and a regular advisor?
A: Fiduciaries are legally required to act in your best interest. Always ask if your advisor is one.
Q: Is flat fee better than AUM?
A: It depends. Flat fee gives cost certainty. AUM aligns advisor incentives to grow your wealth. Either can work if the value’s there.
Bottom Line
You don’t have to hire a financial advisor. But if you want someone who:
- Sees around corners
- Saves you time & taxes
- Acts as a second brain for your money
…then outsourcing might be the best investment you make this year.
Explore vetted financial advisors on Sam’s List →
Author:Kimberly Green, cofounder @ Sam’s List
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