Most people don’t think twice about how they pay for financial advice, especially after they have an established relationship with an advisor. They focus on performance, the firm name, or the investment strategy. But they rarely stop and ask:
How much did my advisor’s pay increase this year – and why?
Let’s go through a very common example of how some financial advisors have received outsized raises over the last 3 years.
In a traditional investor/advisor relationship, the advisor gets paid based on a percentage of assets under management (AUM). A common fee that is assessed is ~1% of assets under management (some advisors charge more; some charge less). So, when the stock market goes up or you contribute more to the account, the advisor gets a raise!
- Not because they worked harder
- Not because they spent more hours with you
- Not because they provided extra services
They got a raise, only because the account balance grew.
Over the last three years, both markets and savings have pushed balances significantly higher in many cases. Using the example of a balanced portfolio with 60% invested in Vanguard’s S&P 500 ETF (VOO) and 40% invested in Vanguard’s Total US Bond Market ETF (BND), the annual returns since 2023 have been:
- 2023 = ~18.5%
- 2024 = ~15.5%
- 2025 = ~13.5%
This represents a cumulative return of about 55%. Therefore, if you had $1M invested in VOO/BND at the beginning of 2023, it would be worth approximately $1,550,000 at the end of 2025 assuming you stayed invested and didn’t touch it.
That fee on your original $1M at 1% was $10K/year, is now $15,500…. a 55% pay increase!
During this same time, inflation rates have been:
- 2023 = 3.4%
- 2024 = 2.9%
- 2025 = 2.7%
So, while US inflation’s cumulative increase was around 9.2% compounded, in this example, the advisor’s pay went up around 55% (about 6X inflation!)
Now, include additional savings that you contributed to your accounts, and the fee goes up even more!
Keep in mind, we are using an example of two retail level index ETFs that anyone can buy. This is not some fancy investment strategy that can only be implemented through an advisor.
The Questions Most Investors Never Ask
Before accepting that automatic raise, it’s worth pausing to ask:
- Did my advisor meet with me more?
- Did they do additional tax planning to add value?
- Did they actually work more hours?
- Did they provide new or deeper services?
- Did they outperform the market?
- If so, can they promise to continue that year over year?
If the answers are mostly “no” …Then what exactly did that raise pay for?
Fees Compound Too (Just Like Returns)
We teach investors about compound returns all the time. But fees compound too! If your assets double over a typical 7–10-year market cycle (Rule of 72), then your fees double too. For those that have $1M+ portfolios, that compounded fee drag can cost hundreds of thousands of dollars over decades. That’s money that could have gone towards:
- Family vacations
- Additional savings
- Healthcare costs
- College funds
- Charities
- Money to children and grandchildren
- Or simply spent by you!
Instead, it goes to a bigger paycheck for your advisor. The question eventually becomes, “how much is your advisor relationship worth?”
A Simpler Way to Pay for Advice
At Schuler Wealth Planning, we believe advice should be priced like advice – not like a percentage toll on your life savings.
Instead of:
- “Pay me more because your portfolio grew”
We prefer:
- Flat, transparent fees
- Based on complexity, service and our expertise
- Not tied to market swings and your savings rate
We do this with our two service models to meet the clients where their needs are:
- One-time project-based financial plans for a flat fee
- Traditional ongoing financial planning and investment management for a flat fee
Because when fees don’t automatically rise, more of your money stays with you. Where it belongs!
Final Thought
Great advice is absolutely worth paying for. A CFP® advisor can add value over and above their fee when they:
- Know your financial situation inside and out
- Meet with your regularly to keep your goals top of mind
- Keep you invested in a portfolio that matches your time horizon and risk tolerance
- Review your tax return and plan for tax optimization over your lifetime (maybe one of the biggest value adds)
- Confirm your insurances are appropriate for your stage of life and needs
- Confirm your beneficiaries and estate plans match your wishes
- Help you avoid common errors and gaps in your financial plan
- Give you peace of mind that their expertise will provide a framework and structure to make sensible financial decisions as long as you are working with them
However, giving them automatic pay raises simply because your portfolio grew, or you saved more does not typically align with the value being gained or lost.
If your advisor’s compensation has been rising automatically, it might be time to ask whether the value delivered rose along with it.
A quick second opinion could save significant dollars over your lifetime – and that’s money better spent on your life, not your advisor’s compensation.
IMPORTANT DISCLOSURE INFORMATION:
Past performance is not indicative of future results. All investments involve risk, and there is no guarantee that the strategies or investments discussed by Schuler Wealth Planning, LLC (“SWP”) will be profitable, match prior performance, be appropriate for your individual circumstances, or achieve intended outcomes. This content is for informational purposes only and does not constitute personalized financial, legal, or tax advice. SWP is not a law firm or accounting firm, and no portion of this content should be interpreted as legal or accounting guidance. Please consult with a qualified financial, legal, or tax advisor before making any financial decisions. A copy of SWP’s current written disclosure brochure describing our advisory services and fees is available upon request. Schuler Wealth Planning makes no representations regarding the accuracy, timeliness, or completeness of third-party content linked or referenced, and assumes no responsibility for errors or reliance on such information. If you are an SWP client, please notify us in writing of any changes to your financial situation, investment objectives, or account restrictions so we may update your plan accordingly.
