Pure Benchmarks · Guide

How Much Is My Financial Advisor’s Fee Really Costing Me?

Short answer

Multiply your account value by the advisory fee to get the yearly cost: a 1% fee on $500,000 is $5,000 a year, charged whether the year goes well or badly. Add the expense ratios of the funds you hold, which come out separately. Over decades the cost is larger than the yearly figure suggests, because every dollar paid in fees also stops compounding. Whether that cost is worth it depends on what the advice adds, which you can measure by scoring the decisions made in your account.

Advisory fees are quoted as a percentage, which makes them look small. They are charged on the whole account every year, so the dollar amount is often far larger than people expect. This page shows how to convert your fee into dollars, why the long-term cost compounds, which costs are easy to miss, and how to weigh the fee against what the advice actually delivers.

Link the account your advisor manages and see whether each change made in it beat leaving the portfolio alone, and how the account ranks against real investors in the same risk category.

See Your Free Benchmark Report

Turn the percentage into dollars

Multiply the account value by the fee. A 1% fee on $250,000 is $2,500 a year; on $500,000 it is $5,000; on $1,000,000 it is $10,000. Many firms charge on a sliding scale, so check the schedule in your advisory agreement and your quarterly statement, which should show the fee actually deducted.

Fees compound too

Money taken out as a fee is no longer invested, so it also gives up all the growth it would have earned. Over twenty or thirty years, the gap between an account paying a 1% fee and the same account without it grows much faster than the yearly fee alone suggests. The higher the return and the longer the horizon, the larger the gap.

Costs that do not appear as the advisory fee

Fund expense ratios are taken inside each fund and never show as a line on your statement. Some accounts also carry trading costs, platform fees or wrap fees that bundle several charges together. Your total cost is the advisory fee plus the weighted average expense ratio of your holdings plus any account-level charges.

Cost only matters next to value

A fee is worth paying if the advice adds more than it costs, through better decisions, behaviour coaching during sell-offs, tax planning or planning that you would not do yourself. A low fee with poor decisions can still cost more than a higher fee with good ones. The fee is easy to see; the value takes measuring.

See both sides in dollars

Pure Benchmarks, our own product, applies an annual fee to your real holdings across a historical period to show the ending value with and without it. With a linked account, its Decision Benchmark scores each change made in the account against the portfolio you would have kept, so you can set the fee in dollars beside what the decisions earned or cost.

Link the account your advisor manages and see whether each change made in it beat leaving the portfolio alone, and how the account ranks against real investors in the same risk category.

See Your Free Benchmark Report

Frequently asked questions

How much does a 1% advisory fee cost per year?

One percent of the account value: $2,500 on $250,000, $5,000 on $500,000 and $10,000 on $1,000,000, charged every year regardless of results.

How much do advisor fees cost over 30 years?

More than 30 times the yearly fee, because each dollar paid also loses its future growth. The exact figure depends on returns and contributions, which is why modelling it on your own holdings is more useful than a rule of thumb.

Are fund expense ratios included in my advisor’s fee?

Usually not. Expense ratios are charged inside each fund on top of the advisory fee, so your total cost is both added together.

Is paying 1% to a financial advisor worth it?

It depends on whether the advice adds more than it costs. This page is information for comparison and not a recommendation about any advisor or fee.

How can I compare my advisor’s fee with what their decisions earned?

Pure Benchmarks, our own product, shows the fee in dollars on your real holdings and scores each change made in a linked account against the portfolio you would have kept.

Keep exploring

See how real portfolios at a specific firm rank against everyone else:

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This page is an information baseline for comparison only. It is not investment advice and not a recommendation to buy, sell, replace, or transfer any specific asset, account, or firm. Past performance does not guarantee future results. All figures shown are illustrative.