My financial advisor charges a whopping 2% fee — but my returns have been 30%. Is the cost outrageous or worth it?

That adds up to $6,000 in total fees annually, though as his total invested assets increase over time, he’ll pay more. Assuming he didn’t invest any more money, the cumulative fees paid on a compounding 30% return over 10 years mean his advisor would earn more than $220,000.

While Josh is happy with the performance of his portfolio, he knows it’s unlikely he’ll continue to see such high returns over the next decade — or beyond. And he’s wondering if he should consider other options for his money instead.

Different types of advisor fee structures

Whether you want to start working with a financial advisor or, like Josh, you’re not sure if there are better options available to you, it’s important to first understand the different types of fee structures charged by financial advisors.

For ongoing investment management, the most common fee structure is assets under management (AUM), where you pay your advisor an annual percentage of the balance. Indeed, the majority (92%) of advisory firms incorporate AUM fees in some way, according to research from Kitces.

They might also offer a tiered schedule, which means as you hit higher tiers, you’ll pay a progressively lower fee.

The general industry benchmark for AUM fees is around 1%, with rates typically falling somewhere between 0.5% and 1.25%, according to District Capital Management’s 2026 fee analysis.

Higher fees are typically associated with more complex needs, which can include “tax planning needs, multiple income sources, equity compensation, federal benefits coordination, and ongoing investment management layered on top of planning,” according to the analysis.

Kitces research found that for portfolios under $1 million, fees typically range between 1% and 1.2%. So Josh’s 2% fee is definitely on the high side. And Josh doesn’t have complex financial planning needs at this point in life.

A robo-advisor comes with lower fees (typically 0.25% to 0.50% annually), but there are also hybrid options that pair robo-advisors with human advisors with a slightly higher fee.

For one-time advice, you could opt to pay an hourly fee, which could range from $200 to $450 an hour. You could also pay a flat fee for a standalone financial plan, which could range from $1,000 to $5,000.

An annual retainer provides ongoing planning and can range from $6,000 to more than $10,000 a year, depending on your needs. For clients with small portfolios, or those just starting out, a monthly subscription is another option, which can range from $200 to $600 a month.

It’s also important to consider the type of advisor you want to work with. Those with credentials, such as CFPs and CPAs, tend to charge more. But as fiduciaries, they’re legally required to act in your best interest.

Aside from fee-based advisors, there are also commission-based advisors who earn a commission when they sell certain financial products, such as mutual funds or insurance policies.

In some cases, the upfront fees might be lower, but they could end up recommending products that earn them a higher commission — not necessarily the ones that best suit your needs.

Deciding what’s best for you

Once you understand what’s out there, you’ll have a better understanding of what meets your needs. It’s possible to manage your own money, but a study by the TIAA Institute — among others — shows that advisor relationships are linked to stronger financial behaviors and higher net worth.

The study found that the average net worth of advised households is $800,000, compared to $388,000 for non-advised households. “This wealth gap is consistent with the cumulative impact of better financial behaviors, superior investment allocation, and greater tax efficiency that are characteristic of those in an advisory relationship,” according to the survey.

It also found that professional advice can deliver annual returns that are 1.4% to 2.4% higher, “regardless of lifestage at which the advisory relationship begins, and without requiring increased savings.”

The key is finding the right advisor relationship for your specific needs. For example, if your advisor is providing a range of services, from investment management to tax strategy, estate planning and insurance review, then a higher fee may make more sense.