A 1% fee is normal: it’s the median rate fee-only firms charge on the first tier of assets. But 1% sounds small and isn’t. It’s $5,000 a year on $500,000, $10,000 on $1 million and $20,000 on $2 million, and the dollars grow as your balance does.
Whether that’s too much comes down to two questions: what you get for it, and whether you could get the same help for less.
1% in dollars
| Assets | Fee in year one | Over 10 years | Over 20 years |
|---|---|---|---|
| $500,000 | $5,000 | about $60,000 | about $149,000 |
| $1,000,000 | $10,000 | about $120,000 | about $298,000 |
| $2,000,000 | $20,000 | about $240,000 | about $596,000 |
Ending balance by how you pay. Hover or tap the chart for any year.
Source: Wellspent fee report median flat fee; 5% yearly growth before fees
Data
| Year | No advisory fee | 1% of assets | $4,500 flat fee |
|---|---|---|---|
| 0 | $1,000,000 | $1,000,000 | $1,000,000 |
| 5 | $1,276,282 | $1,216,653 | $1,251,416 |
| 10 | $1,628,895 | $1,480,244 | $1,572,294 |
| 15 | $2,078,928 | $1,800,944 | $1,981,825 |
| 20 | $2,653,298 | $2,191,123 | $2,504,501 |
Assumes the portfolio grows 5% a year before fees and the fee is taken each year at a flat 1%. Real returns vary; the point is the shape, not the exact figure.
The 20-year totals are large because the fee is charged on a growing balance, every year. The cost also compounds the other way: money paid in fees isn’t invested. On $1 million over 20 years, the gap between paying 1% and paying a $4,500 flat fee comes to about $313,000 in ending value under the same assumption.
What you should get for 1%
A percentage fee usually covers more than picking funds. At a good firm, 1% includes:
- Investment management, rebalancing and tax-loss harvesting
- A full financial plan, updated as life changes
- Tax planning, such as Roth conversions, withdrawal order and charitable giving
- Retirement income planning and Social Security timing
- Coordination with your accountant and estate attorney
- Being reachable when something happens
If you’re paying 1% and getting a portfolio and an annual meeting, you’re paying for a lot you don’t receive.
When 1% is fair, and when it isn’t
It can be fair when your situation is complex (a business, equity pay, an inheritance, retirement income from several sources), you want someone else to run the investments, and the advisor does real planning every year.
It’s worth questioning when:
- Your balance is large. Many firms lower the rate as balances grow. A full 1% on $3 million is $30,000 a year; with a tiered schedule such as 1% on the first $1 million and 0.75% on the rest, it would be $25,000.
- You mostly need advice, not management. If you’re comfortable holding a few index funds, a planner who charges a flat fee or by the hour can cost a fraction as much.
- The advisor also earns commissions. A fee-based advisor can charge 1% and still be paid by product companies. With a fee-only advisor, the fee is the whole cost.
What a lower rate looks like
Many firms charge less as balances grow. Here’s what a tiered schedule does to the first-year cost, using 1% on the first $1 million, 0.75% on the next $2 million and 0.5% above $3 million as an example (firms set their own breakpoints).
| Assets | Flat 1% | Tiered example | Effective rate |
|---|---|---|---|
| $1,000,000 | $10,000 | $10,000 | 1.00% |
| $2,000,000 | $20,000 | $17,500 | 0.88% |
| $3,000,000 | $30,000 | $25,000 | 0.83% |
| $5,000,000 | $50,000 | $35,000 | 0.70% |
If you’re paying a full 1% on a large balance, ask your advisor for their schedule.
Cheaper ways to get the same help
| Option | Typical cost (US median) |
|---|---|
| Ongoing planning fee | $4,500 a year |
| One-time plan | $2,000 |
| Hourly | $300 an hour |
| Percentage of assets, first tier | 1% a year |
At $1 million, the median ongoing planning fee costs less than half of 1%. You’d manage the investments yourself or pay separately for low-cost management, but the advice is the same kind of help.
How to bring your cost down
- Ask for breakpoints. Many firms charge less above $1 million or $2 million. Ask what your blended rate would be.
- Ask for a flat-fee quote. Some firms that charge 1% will quote a fixed price.
- Compare against published prices. The fee report shows what fee-only firms charge by state.
- Check for hidden costs. Fund expenses, wrap fees and platform fees sit on top of the advisory fee. Your advisor’s Form CRS on the SEC’s adviser search lists them.
For the full picture at your level, see what an advisor costs on $500K, $1M or $2M, or use the fee calculator.