Fees & Advisors
Is Your Advisor Taking 25% of Your Retirement Income?
A 1% fee sounds small. But on a $1 million retirement account, it's $10,000 a year. If you're living on 4% of that account, your advisor is taking a quarter of your income. Every year. For life.
A $1,000,000 retirement account
to live on (4%)
1% fee
your retirement income
You took all the risk. You saved for decades. They take a quarter.
How I learned this
I paid my dues. I've spent 15 years learning how to invest in the stock market, starting the day I left medical school in 2010. All roads led me to a fairly simple way to invest that protects me from market crashes and doesn't take much time or research.
But the first thing I had to learn was what financial advisors actually do for their clients, and what it really costs. Most people have no idea. If they did, a lot fewer would hand over their money to be “managed.”
What most advisors actually do
Here's the playbook at many firms: put the client into a handful of funds, let the money sit, and charge about 1% of the account every year for the privilege.
Don't get me wrong. Buying good funds and leaving them alone is a great way to build wealth. But they're funds you could buy yourself. So why pay 1% a year, every year, for someone else to click “buy”?
What 1% really costs you
Fees come out every single year, and the money they take never gets to compound for you again. Jack Bogle, the founder of Vanguard, called this “the tyranny of compounding costs.” Here's what it looks like on a $250,000 portfolio over 20 years:
$250,000 invested for 20 years
(9% minus a 1% fee)
1% fee cost you
About $123,000 of that is fees paid straight out of your account. The rest is the growth those dollars never got to earn.
Most clients never see that number. The fee comes out quietly, a little at a time, so it never feels like $235,000.
The funds charge you too
Many advisors don't use low-cost index funds. They use actively managed mutual funds with their own fees inside, on top of the advisor's cut. Even a well-run fund can't outrun that. The Growth Fund of America (AGTHX), a long-time advisor favorite, nearly kept pace with the S&P 500 over the last 10 years. But here's what its investors actually ended up with:
$100,000 invested for 10 years (Oct 2016 – Oct 2026)
About $50,000 behind on every $100,000, and that's with one of the better funds.
Total returns with dividends and distributions reinvested: SPY 15.41%/yr, AGTHX 14.96%/yr (TotalRealReturns, ending Oct. 16, 2026). Sales charge per the fund's prospectus; advisor scenario is illustrative.
The hidden tax bill nobody mentions
Actively managed funds buy and sell constantly. When they sell winners, they pay those profits out to shareholders every year as capital gains distributions. In a regular brokerage account, you owe tax on them, even if you never sold a single share. Index funds and ETFs rarely do this. So active-fund investors pay three ways: the fund fee, the advisor fee and the tax bill.
“But a professional will protect me from a crash”
People have been sold the idea that advisors are the pros: they'll zig when the market zags, get you out before a crash, and beat what you could do on your own. The data says otherwise. Over the long run, almost no professional money managers beat a simple low-cost index fund.
Active large-cap funds that trailed the S&P 500
Source: S&P Dow Jones Indices, SPIVA U.S. Year-End 2025 Scorecard.
If the full-time professionals running these funds can't beat the index, an advisor who picks a few of those funds for you isn't likely to either, especially after taking 1% off the top.
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The $336,000 fee-avoidance tip
Thankfully, investing on your own is simpler than the industry wants you to believe. Here's the tip: a low-cost target date fund does the core job most advisors do, for a small fraction of the cost.
You pick the fund with the year closest to when you plan to retire, for example a “2040” fund. It holds a mix of stocks and bonds that fits your age, gradually shifts toward safer investments as you get closer to retirement, and rebalances automatically. Low-cost versions charge as little as about 0.08% a year.
$250,000 for 20 years, same 9% market return
The difference: $336,357, just from fees.
Illustrative: assumes a 9% annual return before costs in both cases.
Find your number today
Pull up your last statement and look for a line called “advisory fee,” “management fee” or “wrap fee.” Multiply your account balance by that percentage. That's what you paid this year. Then look up the expense ratio of each fund you own and add that on top. Most people are shocked by the total.
When an advisor can be worth it
To be fair, some people get real value from an advisor: complicated taxes, estate planning, or someone who knows they'll panic and sell everything in a crash without someone talking them down. If that's you, look for an advice-only or flat-fee advisor who charges for their time, not a percentage of your money every year forever.
The bottom line
If you want to retire with the most money possible, you have to avoid unnecessary fees, whether they go to an advisor or to an actively managed fund. For most people, a low-cost target date fund or index fund gets you the core of what an advisor offers for a fraction of the price.
If you want to learn to invest on your own, and maybe go a step further and learn how long-dated options can protect you when markets get rough, keep coming back to this blog. Or if you'd rather jump in now, The Strategic Investor course packs everything I've learned in 15 years into a step-by-step plan, including how I invest with my downside defined before I ever place a trade.
