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The fee your advisor charges is often based on the services you’re receiving, the individual advisor’s fee structure and other factors, including the amount of money you have to invest. With $1.4 million invested, many advisors would likely charge about 1% of the account balance as an annual fee. However, this could vary widely among advisors. You can, however, negotiate with many advisors and possibly pay less. In a pinch, you can always decide to go with another advisor who charges less, offers a selection of services that better fit your needs or is preferable in other ways.
You can use this free tool to match with a vetted fiduciary financial advisor to discuss their fee structure.
Advisor Fees in Brief
Financial advisors charge for their services in a number of different ways. The five primary fee setups are listed below, along with brief descriptions:
| Type | Details |
| Percentage of assets under management | Based on a percentage of the total assets in your account. May differ based on account size. |
| Hourly rate | A dollar amount charged per hour of work. |
| Flat fee | A flat fee, usually annual, for providing services. |
| Commission | Compensation paid by investment product providers |
| Performance-based | When a preset performance goal is reached, an additional fee may be paid. |
Fees based on a percentage of assets under management usually vary from 0.5% to 1.5%. A fee of 1% is about average. The fee may be tiered, with smaller accounts paying a higher percentage and larger accounts paying less.
With $1.4 million in an account and a 1% fee, an investor would pay approximately $14,000 per year in fees. This may not be all the fees that are charged, or that the advisor receives. For instance, an advisor may receive a combination of fees paid by the investor, as well as commissions paid for trades or by financial companies that provide investment products.
Value of Fees
A 1% fee may be a bargain, or it may be too much. It depends in part on the services you receive in exchange. Advisors can supply you with expertise and experience along with an objective source of suggestions about ways to reach your financial goals. The topics you can expect help with include investing, retirement, estate planning and taxes. The benefits you may receive can include avoiding or reducing losses and maximizing gains.
Advisors can have different value at different stages of your life. When you’re younger and have few assets, it may be less useful to have a professional overseeing your financial affairs. As you near retirement and have accumulated significant account balances, the stakes are higher and well-seasoned advice becomes more important.
Fee Negotiation
Fees are not necessarily set in stone. Although not all advisors are willing to negotiate their charges, many are. You can find out what an advisor’s fees are and whether they are open to negotiation by looking at their Form ADV, an official document they must file with the Securities and Exchange Commission.
If you’re inclined to negotiate fees, first make sure you understand what you’re paying and what you’re getting. Ask your advisor for a breakdown of the fees and services. Next, if you want to suggest a lower amount, propose a specific fee, such as a lower percentage of assets under management. You may receive a counter-offer, so consider adding a cushion to give you room for your own counter.
Advisor Selection
If you can’t reach an agreement on fees, your final option is to look for another financial advisor. If you do, don’t base your selection on fees alone. Start by looking for candidates, focusing on advisors who serve clients like you based on factors such as your account balance, age, income and financial concerns.
Aim to interview at least three of the candidates you identify. Basic questions you’ll likely want answered include whether the advisor abides by fiduciary duty to always act in the best interests of clients. Also discuss the services offered and the fees charged for them. Communication practices may also be something to focus on. On that topic, any time an advisor candidate refuses to answer a question or can’t explain something clearly, consider it a red flag and an indication to look elsewhere for advice.
If you can’t find an advisor who suits your needs and your fee budget, you may want to consider a robo-advisor. These are automated investment programs that use software and computers in place of a human advisor. They usually charge lower fees, as little as 0.25%, and may be most appropriate for younger clients or those with smaller account balances.
What Services Could a $1.4 Million Portfolio Include?
If you’re paying $14,000 a year in advisory fees, it helps to know what a full-service relationship at this level could look like. The specifics vary by advisor, but here’s a general picture of the services that a portfolio of this size could warrant.
Investment management at this level could go well beyond a standard mix of index funds. An advisor could build a portfolio customized to your risk tolerance, time horizon, and income needs, then actively monitor and rebalance it as your life and the markets shift. You could also expect reporting that shows not just your returns but how those returns compare to relevant benchmarks after fees. For a $1.4 million portfolio, generic model portfolios may not be enough. The complexity of your holdings and the amount at stake could call for a more hands-on approach.
Tax planning could be one of the most valuable parts of the relationship at this asset level. That could include tax-loss harvesting, asset location across taxable and tax-advantaged accounts, Roth conversion analysis, capital gains management when selling positions, and withdrawal sequencing if you’re in or approaching retirement. For a portfolio generating meaningful income from dividends, interest, and realized gains each year, an advisor who factors taxes into every investment decision could save you far more than the fee you’re paying.
Retirement income planning could also be a significant part of the service. If you’re nearing or already in retirement, an advisor could help you model different withdrawal scenarios, evaluate Social Security claiming strategies, manage required minimum distributions, and stress-test your plan against market downturns and inflation. Getting the withdrawal order right across taxable accounts, traditional IRAs, and Roth accounts could make a meaningful difference in how long your money lasts and how much you keep after taxes each year.
Estate planning support could round out the advisory relationship. At $1.4 million, an advisor could review your beneficiary designations, account titling, and trust structures to check whether everything lines up with your actual intentions. They could also work alongside your estate attorney to flag gaps and make sure your financial plan and estate plan are pointed in the same direction. Your advisor wouldn’t draft legal documents, but they could be the one making sure nothing falls through the cracks between your investment accounts and your broader plan.
For $14,000 a year, you could also expect consistent communication and access. That could mean quarterly reviews rather than a single annual meeting, plus availability for calls when something comes up, whether it’s a job change, an inheritance, a large purchase, or a question about a tax move. An advisor who is hard to reach or only checks in once a year may not be delivering the level of attention that a $1.4 million portfolio could warrant. Knowing what a full-service relationship could include gives you a clearer basis for evaluating whether your current fee is working for you.
Bottom Line
A 1% fee on $1.4 million in investments means paying $14,000 a year for advice. Whether that figure is reasonable depends on the services provided and how well the advisor is helping the investor reach their financial goals. Negotiating a lower fee is sometimes possible, and investors who feel they are overpaying may benefit from seeking an advisor who charges less. When interviewing candidates, prioritizing openness and candor alongside credentials and cost is advisable.
The value of a financial advisor ultimately depends on the investor’s individual circumstances.
“Regardless of how much you are paying, you need to ensure that the fee you pay is appropriate for the services you receive. Any fee can be too much or a bargain depending on your needs and the value provided,” Brandon Renfro, CFP®, RICP, EA.
Brandon Renfro, CFP®, RICP, EA, provided the quote used in this article. Please note that Brandon is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.
Money Management Tips
- Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Where you choose to retire can have a significant impact on how well prepared you are financially for retirement. SmartAsset’s Retirement Tax Friendliness Calculator gives you the information you need about whether a state taxes Social Security benefits, retirement account withdrawals and pension benefits.
- Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
- Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
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