Is It Worth Paying a Financial Advisor 1%?

A financial advisor is a professional who can help you manage your money, but the service comes at a cost. Oftentimes, the fee is 1% of the amount of assets you give an advisor to manage. In some circumstances, this expense can be substantial. This article is designed to help you evaluate whether a 1% fee is worth it, given your circumstances.

headshot of Thomas J. Brock, CFA, CPA
  • Written By
    Thomas J. Brock, CFA®, CPA

    Thomas J. Brock, CFA®, CPA

    Expert Contributor

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

    Read More
  • Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for

    Savannah Hanson

    Senior Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Updated: May 11, 2023
  • 7 min read time
  • This page features 3 Cited Research Articles
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APA Brock, T. J. (2023, May 11). Is It Worth Paying a Financial Advisor 1%? Retrieved June 8, 2023, from

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Chicago Brock, Thomas J. "Is It Worth Paying a Financial Advisor 1%?" Last modified May 11, 2023.

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Key Takeaways

  • A financial advisor is a professional who can help you manage complex financial matters, including planning for retirement and investing. Many advisory arrangements have a 1% fee structure, which means services are billed at a rate of 1% of assets under advisory (AUA) on an annual basis.
  • You can expect an AUA fee of up to 1% on assets of $1 million or less. However, you should demand an increasingly economical rate for larger investment portfolios. That said, in very rare cases, paying more than 1% can be justified.
  • Beyond a prospective advisor’s fee arrangement, make sure he or she is a fiduciary that is committed to always act in your best interest. Generally, this means working with a Certified Financial Planner (CFP)®.

What Is the 1% Fee Structure?

The 1% fee structure is a billing arrangement, whereby a financial advisor charges a client 1% of the assets managed on his or her behalf. Commonly referred to as an assets under advisory (AUA) arrangement, the fee is expressed on an annualized basis. However, invoices are commonly sent to clients monthly or quarterly, depending on the advisor.


Assets under Advisory, or AUA, refers to the market worth of a client’s portfolio, for which the client seeks help from an advisor.

Source: Law Insider

Most clients can expect to pay an annual advisory fee that varies based on the size of their AUA. However, the dollar value of a portfolio is not the only factor to consider when assessing whether it is worth paying 1%. Another important factor to evaluate is the advisor’s service offering.

Essentially, to justify a 1% fee, an advisor must be positioned to offer you a broad array of services designed to help you budget, bank, manage debt, optimize insurance coverages, minimize tax burdens, plan for retirement, implement an estate plan and manage your investments. To justify a fee in excess of 1%, he or she must also generate investment returns that consistently exceed relevant market indices (net of the advisory fee).

How Does the 1% Fee Structure Work?

Assume you are a client of a full-service advisor, and he or she oversees all of your investment holdings, which total $960,000. In exchange for providing services, including tax planning, retirement planning and estate planning, the advisor charges you a 1% annual fee for managing your investment portfolio.

 As computed below, this results in an annual fee of $9,600, which your advisor bills in quarterly installments of $2,400 ($9,600 ÷ 4 = $2,400).

Annual AUA Fee = Investment Portfolio Amount × AUA Percentage Fee

Annual AUA Fee = $960,000 × 0.01 = $9,600

 The 1% Fee Structure vs. Other Fee Structures

Advisors who maintain the 1% fee structure are usually fee-only financial advisors. They receive 100% of their compensation from clients. They do not receive any commissions, referral fees or kickbacks from investment fund providers and insurance companies for recommending their products and services.

That said, the 1% fee structure is not the only way fee-only advisors charge clients. Some charge more or less than 1%. Some advisors charge an hourly rate, while others charge a flat-dollar, piecemeal fee for their services. Still, others maintain a hybrid framework. 

No single approach is necessarily superior to the others. The relative attractiveness of each method is largely dependent on the extent and duration of your needs.

Fee-based financial advisors differ from fee-only advisors. Fee-based advisors receive compensation directly from clients, but may also receive compensation from fund providers and insurance companies for recommending products and services. This can be highly detrimental to consumers, given the inherent conflicts of interest.

How Do Fees Relate to the Fiduciary Standard?

Differentiating between fee-only and fee-based advisors is important because it can help you identify advisors who are legally and ethically committed to always act in your best interest. Known as the fiduciary standard, this level of care is normally associated with fee-only advisors.

Fee-only advisors are not necessarily fiduciaries, but all fiduciaries must be fee-only advisors. Consequently, fee-based advisors are not fiduciaries. They are not required to act in their clients’ best interests. Rather, they are merely expected to ensure their recommendations are suitable for clients.

Experts recommend you work with fiduciary financial advisors. The best place to locate one in your area is the CFP Board, a non-profit organization that sets and enforces standards for the renowned Certified Financial Planner (CFP)® certification.

Average Percentage Fees for Financial Advisors

Typically, you can expect to pay an annual advisory fee of up to 1% for portfolios totaling $1 million or less. However, fee breaks are common for portfolios larger than $1 million. For example, a fee-based advisor could maintain the following tiered AUA fee structure for high-net-worth clients.

Average Percentage Fees
1% fee for AUA up to $1 million
0.75% fee for AUA in excess of $1 million and up to $3 million
0.5% fee for AUA in excess of $3 million and up to $5 million
0.25% fee for AUA in excess of $5 million

Under this structure, a client with a $7 million portfolio would be charged $40,000 per year, which equates to an AUA rate of 0.57%. This example is based on average fees, but that doesn’t mean these rates are a hard-and-fast rule for financial advisors. 

Tiered fee structures vary depending on an advisor’s experience, the breadth of his or her service offerings and the extent to which he or she can consistently outperform the market. 

Read More: How Much Does a Financial Advisor Cost?

When Is a Fee Too High?

An AUA fee above 1% for a portfolio of $1 million or less is not ideal. For larger portfolios, such a fee is usually unacceptable, given the increasingly competitive nature of the financial advisory industry.

Beyond these AUA-based rules of thumb, evaluating an advisory fee is a very nuanced process. This is due to the many factors that influence pricing – such as the complexity of your financial affairs, the diversity of the services you require, the extent to which you embrace active versus passive investing and your desire for public or private market access.

Ultimately, paying too much for an advisor can flip his or her value proposition from positive to negative and eat into your hard-earned savings. Ensuring you pay an economical fee is critical to growing and preserving your wealth.

Can You Negotiate Fees?

Historically, negotiating financial advisory fees was not feasible for individuals with investment portfolios under $1 million. Fortunately, this is changing as a result of technological advancements and heightened competition.

Generally, the greatest potential for a fee decrease exists when you have relatively simple financial affairs and an inclination for low-cost, passive investing via index funds and/or exchange-traded funds (ETFs).

If you are comfortable with the idea of having little to no human interaction and leveraging algorithm-based advisory services, robo-advisory platforms can save you money. These services reduce the standard 1% AUA fee to a range of 0.20% to 0.45%.

Is the 1% Fee Right for Your Financial Needs?

In deciding whether it’s worth it to pay a financial advisor the 1% fee, you need to consider the size and complexity of your financial affairs and whether it’s feasible to manage them alone. If your finances are relatively simple and you are not exposed to a lot of downside risk, you may not require advisory assistance.

However, as your finances grow and become more complex, professional oversight can be very beneficial, especially if you lack the time or expertise to get your hands around everything. The 1% fee can be worthwhile, given any of the following circumstances:

  • You have complex financial affairs. Generally, this means some combination of the following circumstances: You own a complex assortment of assets, you have substantial debts, you generate various streams of volatile income, you have extensive risk management requirements and you have complicated tax obligations.
  • You lack the time or financial expertise. A deficiency in time or expertise can lead to insignificant independent financial management. Oftentimes, it can be disastrous.
  • You are retiring soon and do not have a comprehensive retirement plan. If you are retiring in 10 years or less and have not put together a retirement plan, you need to get moving. A fiduciary advisor can help you establish a plan. And if you lack investment experience, he or she can also manage your money.
  • You want an objective opinion. Financial management is complicated, and it can be stressful. For most of us, the challenge is magnified by many behavioral biases that influence our actions. As a result, obtaining objective advice from an emotionally-detached third party can be sensible.

Editor Malori Malone contributed to this article.


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Last Modified: May 11, 2023

3 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Certified Financial Planner Board of Standards, Inc. (n.d.). Find a CFP Professional. Retrieved from
  2. CFA Institute. (n.d.). The Behavioral Biases of Individuals. Retrieved from
  3. (n.d.). Exchange-Traded Fund. Retrieved from