What Do Financial Advisors Cost?

Are you someone who wants to make sure you have enough money when you retire?

And, wants to keep as much as possible of what you save in your retirement account?

Have you considered using a “financial advisor” to manage your money?

Let’s go through a couple scenarios and see what a “financial advisor” would cost you.

I will assume:

  • you’re 50
  • you’re retiring at 67
  • have $100,000* outside of your 401(k)**
  • add $10,850 per year (the sum of the (current) annual Roth IRA and HSA maximums)
  • get 5% net return

*  $100K might be low (or high, given what I’ve seen from surveys) and allows for easy scaling in the scenarios below. If you have more than $100K, then you have more to lose and if you have less, I can help you catch up.

** I’m assuming 401(k) funds are separate because “financial advisors” need to take “custody” of your money so they can manage it; that’s not possible with 401(k) accounts.


You hire a financial advisor who charges you 1% of AUM (Assets Under Management) (1% is typical, some charge more, few charge less).

They spend a few hours with you and give you a (likely cookie-cutter) financial plan and recommend you make some changes to your Asset Allocation (how your money is invested) and use funds they offer (it will “increase your alpha” and “mean greater returns”).

After the initial meetings and “plan” you get quarterly e-mails and have a phone number you can call to ask questions (and maybe get good advice?).


You complete an eight-session coaching program where you:

  1. create a comprehensive (but easy-to-understand) financial plan
  2. learn everything you need to self-manage your investments
  3. upgrade your money mindset
  4. learn how to find reasonably priced, fee-only professionals for the occasions when you need expert help

In the years that follow you spend an average of a couple hours per year on your retirement portfolio and planning.

You have the confidence that comes from understanding how financial markets and retirement saving and investing work.

You sleep well and aren’t bothered by market downturns – you know over time, your portfolio, like the markets, will go up.

You have a solid plan that you understand and trust, your investments are automatic and you know how and when to get advice for occasional investing, tax, insurance and legal questions.


What will each one cost you?

People often hire a “financial advisor” without doing the math.

First, Scenario One.

Because of the 1% AUM fee, and higher expense ratios on the funds in your portfolio, this option will cost you approximately 1.5% (I’m being kind on the percentage here… ) annually.

If a “financial advisor” manages your money for 17 years, how much will you have?


How about Scenario Two?

Your annual cost would be 0.4%. (yes, you read that right . . . four tenths of one percent).

How much would you have after 17 years if you did the coaching program and self-managed?


That’s $59,769 more in your pocket.

I’m guessing you’re like me and $60K is nothing to sneeze at.

AND you’d have greater peace-of-mind all along the way because you’ll understand how and where your money is invested and you’re only paying for what you really need.

(AND the skills you will have learned and honed will be transferrable to your 401(k), which you would have been able to manage better as well.)

Key Fact One:

We all invest in the same stock market. The difference is fees. (And no, clever advisors or active mutual funds or complex portfolios don’t beat the market. They just don’t.)

Key Fact Two:

The simple fact of the matter is that most “financial advisors” are sales-people and their primary allegiance is to the company they work for. They are going to use products in your portfolio that are more expensive than they need to be – and sometimes sell you things you don’t need – and it will all be legal. Ethical? That’s another question.


I wrote this post to see if there was any interest in the coaching program I mention above. I am developing it now and looking for beta-phase clients.

The coaching program will be designed for those in their 40s and 50s with up to approximately $350,000 in Net Worth (not including any home equity).

If you’re curious, click here to send me a message or call 860-264-4356.

Similar Posts