Mar 28, 2026
If you use a financial advisor, you’ll have to pay their fees, which could be calculated under several different structures.
It’s a relationship that requires a lot of trust, whether you’re hiring someone for advice, or to actively manage your investments.
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However, what would happen if your trusted advisor accidentally overcharged you? Would they just owe you the amount you overpaid, or do they have to include interest? If so, how is it calculated?
Imagine Jeff, who has been working with the same financial advisor for a decade, and was recently alerted that his account had been overcharged for advisory fees for 10 years, to the tune of almost $15,000.
Jeff isn’t sure that the amount the firm his advisor is employed with is offering a fair recompense, and he’s wondering if he should report the incident to a regulator.
Understanding fees
To check whether you are being charged accurately, it’s important to understand what kind of rate structure the advisor uses.
If you work one that is fee-only, they do not accept commissions for their services (1). According to the National Association of Personal Financial Advisors, they could charge hourly, as a retainer, as a percentage of assets, or as a fixed rate. If their fee is based on a percentage of assets, this is known as “assets under management” (AUM).
Advisors who use an AUM fee structure may have a minimum asset requirement for clients they work with (2). They may also employ a tiered system, where fees go down as assets grow; for example 1% on a client’s first $500,000, and 0.5% for assets above that (2).
While it’s easier to tell if you have been overcharged by an advisor when they use a fixed rate, hourly, or retainer structure; if they use AUM, you might not notice any discrepancies as easily since the fee is directly withdrawn from your investment account. In a CNBC report, Kathryn Berkenpas, the managing director of corporate growth at the CFP Board, a non-profit that oversees the certified financial planner designation, said that this can sometimes mean that these fees “fly under the radar (3).”
CNBC also notes how AUM is “the most common type of advisor compensation,” as roughly 72% of advisors employed an this fee structure in 2024, and 78% are expected to do so in 2026, according to financial services consulting firm Cerulli Associates.
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What to do if you’re overcharged
Back to the scenario involving Jeff. His advisor uses an AUM fee plan, with a tiered structure dependent on account value — 1% for $500,000 and below, 0.75% for those between $500,000 and $1 million, and 0.5% for those over $1 million.
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At first, Jeff’s account was less than $500,000 , but it has since increased to over $1 million in the 10 years since he opened it. According to his advisor, however, he was mistakenly charged a 1% fee for the entire 10 years. Those errors added up to about $15,000 in overpayments.
In addition to being repaid the nearly $15,000 he unknowingly paid, Jeff will also be refunded interest, which is be calculated using the Department of Labor’s Table of Underpayment Rates.
Unfortunately, situations like Jeff’s do occur. According to a risk alert issued by the SEC Division of Examinations in 2021, an analysis of 130 SEC-registered advisors found rate errors, including over-billing and inaccurate calculations of tiered fees (4).
While the advisor’s use of the Department of Labor’s Table of Underpayment Rates to calculate the interest owed is likely above board, if Jeff was concerned about his actions, he could contact the SEC or the Financial Industry Regulatory Authority for advice, or to file a complaint.
To protect yourself from overpaying fees, you can ask for a quarterly or annual report that breaks down what you’ve been charged. Also, make sure that you fully understand the advisor’s fee structure.
If your advisor cannot or will not explain their cost breakdown in plain language, or if they refuse to provide a report itemizing what you’ve paid, this is a red flag in terms of their professionalism and trustworthiness.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
NAPFA (1); Alden (2); CNBC (3); SEC (4)
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Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
