Cost of Advice Calculator

Compare a percent-of-assets advisory fee, a flat yearly fee and no adviser on the same balance and return, compounded year by year, with every fee counted.

Three ways to pay for one portfolio

Live tool

Starting balance (USD)Annual return before costs (%)YearsFund costs, all three (% a year)Advisory fee (% of assets a year)Flat fee (USD a year)Flat fee rises (% a year)

Self-directed

3,749,448 USD

after 30 years

No advice fee. Fund costs 23,389 USD.

1% of assets a year

2,773,047 USD

after 30 years

Fees paid 386,803 USD. 976,400 USD below self-directed (26.0%).

2,000 USD a year, flat

3,549,237 USD

after 30 years

Fees paid 60,000 USD. 200,211 USD below self-directed (5.3%).

The gap below self-directed is the fees plus the growth they would have earned: at these inputs the percent fee costs 386,803 USD in fees and 589,597 USD in growth that never compounded. A year of the 1% fee costs more than the first year's flat fee once the balance is above 200,000 USD.

Year	Self-directed	1% of assets	Fee that year	Flat fee	Fee that year
1	534,733 USD	529,383 USD	5,000 USD	532,593 USD	2,000 USD
5	699,524 USD	665,224 USD	6,283 USD	687,231 USD	2,000 USD
10	978,669 USD	885,046 USD	8,359 USD	949,176 USD	2,000 USD
15	1,369,206 USD	1,177,507 USD	11,122 USD	1,315,651 USD	2,000 USD
20	1,915,585 USD	1,566,612 USD	14,797 USD	1,828,366 USD	2,000 USD
25	2,679,998 USD	2,084,296 USD	19,686 USD	2,545,680 USD	2,000 USD
30	3,749,448 USD	2,773,047 USD	26,191 USD	3,549,237 USD	2,000 USD

Balances at the end of each year. Each year’s fees come out of that year’s opening balance and the rest earns the return, so a 1% fee on 500,000 USD is 5,000 USD in year one. One steady return every year is an assumption no market delivers. Taxes, trading costs and inflation are left out of all three. This compares what each arrangement costs; it does not measure what an adviser adds or takes away.

How it works

The calculator runs one balance forward three times at the same return. The first path pays no adviser. The second pays an advisory fee as a percent of the balance every year, so the fee grows as the balance grows. The third pays a flat fee in dollars, which you can set to rise each year. All three pay the same fund costs, so the differences between them are the advice fees and nothing else.

Each year the fees come out of the opening balance and the rest earns the return. A fee taken out in year one does not just cost its own amount: it also misses every year of growth after it. That is why the gap below the self-directed balance is larger than the fees paid, and the calculator shows both.

The formula

Symbols: B = starting balance, r = annual return, e = fund costs, f = advisory fee, F = flat fee in year one, n = years, each rate as a decimal.

self-directed = B × [(1 − e)(1 + r)]ⁿ
percent fee = B × [(1 − e − f)(1 + r)]ⁿ
flat fee = B × aⁿ − F × (1 + r) × (aⁿ − 1) ÷ (a − 1), where a = (1 − e)(1 + r)

The flat-fee line is the closed form when the fee stays the same each year. With a yearly rise, the calculator runs the same year-by-year steps it uses for the table. A flat fee larger than the balance left takes what is there, and the path stops paying it.

Worked example

500,000 USD, a 7% return before costs, 30 years, 0.05% fund costs, a 1% advisory fee, and a flat fee of 2,000 USD a year that does not rise:

Self-directed keeps 0.9995 of each opening balance and grows it 7%: a = 0.9995 × 1.07 = 1.069465.
500,000 × 1.069465³⁰ = 500,000 × 7.4988952 = 3,749,447.60 USD.
The 1% fee keeps 0.9895 a year: 0.9895 × 1.07 = 1.058765, and 500,000 × 1.058765³⁰ = 500,000 × 5.5460948 = 2,773,047.39 USD.
Its first-year fee is 1% of 500,000 = 5,000 USD. Over 30 years the fees add up to 5,000 × 77.3606 = 386,802.92 USD.
The gap is 3,749,447.60 − 2,773,047.39 = 976,400.21 USD, 26.0% of the self-directed balance: 386,802.92 USD of fees and 589,597.29 USD of growth that never compounded.
The flat fee: 3,749,447.60 − 2,000 × 1.07 × 93.5564 = 3,749,447.60 − 200,210.69 = 3,549,236.91 USD, after 60,000 USD of fees.
The two advice fees cost the same in a year when the balance is 2,000 ÷ 0.01 = 200,000 USD; this balance is above that from the first year.

FAQ

How much does a 1% advisory fee cost over 30 years?

At a steady 7% return before costs and 0.05% fund costs, 500,000 USD grows to about 3,749,448 USD self-directed and about 2,773,047 USD with a 1% fee: 976,400 USD less. 386,803 USD of that is fees paid; the rest is the growth those fees would have earned.

When does a flat fee cost less than a percent-of-assets fee?

When the balance is above the flat fee divided by the percent fee. A 2,000 USD flat fee and a 1% fee cost the same on 200,000 USD; above that, a year of the 1% fee costs more.

When are the fees charged?

At the start of each year, from that year’s opening balance, and the rest earns the return. Advisers often bill quarterly, which moves the figures slightly.

Does this say whether an adviser is worth it?

No. It measures what each arrangement costs at a steady return. Tax work, planning and behavior in a downturn are outside it, and it is not a recommendation for or against hiring anyone.

Continue your analysis

Project the balance with monthly contributions →Test how long the balance lasts in retirement →Swap the steady return for a range of outcomes →

Educational disclaimer

Arithmetic for education, not investment, tax or financial advice, and not a recommendation for or against any adviser or way of paying one. Results assume one steady return every year, which no market provides, and leave out taxes, trading costs and inflation. US and USD conventions.

What it cannot tell you

It cannot tell you whether an adviser is worth the fee: it prices each arrangement at one steady return, and what advice adds or takes away is outside it.