Why Retirees Often Overpay Their Financial Advisor

Many retirees are not overpaying because their fee is too high. They are overpaying because they do not know what the fee is. According to Morningstar's 2024 Voice of the Investor research, 54% of investors don't know how much they pay their advisor, and retirement is often when both your portfolio and a percentage fee are near their lifetime peak. Knowing your number, in dollars, is the first step toward judging whether you're getting your money's worth.

Many retirees are not overpaying their advisor because the fee is too high on paper. They are overpaying because they do not know what the fee actually is. If you cannot say, in dollars, what you paid last year, you are not in a position to judge whether you got your money's worth. That is not a personal failing, it is how the most common fee structure works, and closing that gap starts with a plain look at your own number.

Most retirees do not know what they are paying

According to Morningstar's 2024 Voice of the Investor research, specifically its Advisor Fee Survey sub-study published June 26, 2024, 54% of investors don't know how much they pay their financial advisor. That sub-study surveyed 506 investors who currently work with a financial advisor, so this is not a fringe finding about people who avoid the topic. It is closer to the majority experience. Fee opacity is common, not a sign that you have been careless with your own finances.

The same study found that 30% of Baby Boomers said their advisor's fee transparency did not need to be improved, even though more than half of investors overall could not state their fee. That combination, comfort with the arrangement alongside not knowing the number, is worth sitting with for a moment. It suggests that not knowing your fee can feel normal long before it feels like a problem worth raising.

Part of the reason is mechanical, not personal. Most advisory fees, especially the common assets under management (AUM) structure, are deducted directly from your portfolio rather than billed to you the way a utility or subscription is. You generally never write a check or receive an invoice, so the dollar amount can pass by unnoticed year after year.

Why retirement is when the cost of not knowing is highest

The timing of that gap matters. For most people, retirement lands close to the point when their portfolio is at or near its lifetime peak. If your fee is calculated as a percentage of that portfolio, the dollar amount of the fee is often near its peak too, at the exact moment your paycheck has stopped and every dollar coming out of savings tends to count more.

Kitces Research's 2024 advisor fee survey of 621 advisory firms found the median AUM fee runs roughly 1.00% to 1.20% on portfolios under $1 million, declining to roughly 0.80% to 1.00% on portfolios above $2 million. In today's dollars, 1% of a $1.5 million portfolio is $15,000 this year. 1% of a $2 million portfolio is $20,000 this year. Those are today's-balance figures only, not projections of what the fee could grow to.

Meanwhile, the planning work that matters most in retirement, coordinating Social Security timing, RMDs, Roth conversion windows, and Medicare, generally does not scale up just because your balance is larger. For retirees, that mismatch, a fee tied to balance rather than to complexity, is one more reason the fee itself deserves a closer look. That is not a claim that AUM pricing is inherently wrong, only that the dollar stakes are highest right when you are least likely to have questioned it before.

What overpaying actually means

Overpaying is not simply shorthand for “the fee is high.” A fee can be entirely reasonable, and you can still be overpaying, in the sense that matters, if you do not know what it is or cannot describe what it buys you. Defined this way, overpaying is the gap between what you pay and what you understand you are receiving for it.

By that definition, you could be overpaying at 0.5% just as easily as at 1.5%, because the number on the statement is not really the issue. The issue is whether you can name your fee in dollars this year, describe the services it covers, and judge for yourself whether the two line up. If you cannot do that, the amount on its own tells you very little.

The hidden cost of a fee you never see

AUM fees are typically debited quarterly, straight out of the account, with no separate bill mailed to you and no line item that shows up in your checking account. That structure is not secretive on its own, it is disclosed in your advisory agreement and Form ADV Part 2A, but it is easy to overlook because paying it never feels like a transaction.

That disconnect shows up in the data. According to a 2023 Hearts & Wallets survey of roughly 6,000 U.S. households, reported by CNBC, 20% of consumers think their investment services are free of cost. Another 36% reported not knowing their fees. A fee you never see, and never write a check for, can start to feel like it does not exist. It does, it is simply invisible.

What to ask your advisor right now

You do not need to switch advisors to close this gap. You need the number. A short, direct conversation can get you there:

• What is my exact advisory fee in dollars this year, not as a percentage?
• What specific services does that fee cover: planning, investment management, tax coordination, or something narrower?
• How would that compare to a flat annual fee instead of a percentage of my portfolio?
• Has my fee changed as my balance has grown, and if so, has the amount of work changed with it?

“Are you a fiduciary? Can you put that in writing?” A fiduciary advisor is legally required to act in your interest, not simply recommend what is technically suitable. That is a separate question from fee structure: an advisor can be a fiduciary and still charge a percentage of assets, and an advisor can charge a flat fee without being a fiduciary. Ask for it in writing rather than assuming one implies the other.

“What are my total costs, including fund expenses and platform fees, on top of your advisory fee?” Your advisory fee is only one layer of what you pay. The funds inside your portfolio typically carry their own expense ratios, and the custodian or platform holding your account may charge its own fees, and both can add up on top of the number your advisor quotes you.

“How does your fee compare to a flat-fee model?” This question gives you the language to start a direct, dollar-for-dollar comparison between what you are paying now and what a flat annual fee would cost for similar work. Some advisors may not have a ready answer, and that gap can be informative on its own.

You are entitled to plain answers to these questions. A fiduciary advisor, regardless of fee structure, is required to act in your interest, and that generally includes helping you understand what you are paying and why.

How a flat fee changes the conversation

A flat fee changes what there is to ask. Instead of calculating a percentage against a moving balance, you have one number, disclosed upfront, that does not change just because your portfolio grows. At Your Path Fi, our flat-fee structure is $12,000 per year for ongoing planning and investment management. You can compare that figure to your own advisory fee in dollars without any additional math.

That does not mean a flat fee is automatically less expensive for you, and it is not a claim that switching advisors would save you money. For smaller portfolios, a percentage fee can cost less in dollar terms than a flat fee, and the break-even depends on your specific balance and rate. See the flat-fee-vs-AUM cost comparison for the full math across portfolio sizes. What a flat fee reliably offers is not a lower price for everyone, it is a single, stated number you can hold up against your current fee and evaluate for yourself.

Frequently asked questions

How do I find out exactly how much I'm paying my financial advisor?

Ask your advisor directly for the dollar amount you paid over the last 12 months, not the percentage. You can also check your advisory agreement or Form ADV Part 2A, which discloses the fee schedule, and review your quarterly account statements for the specific line item where the advisory fee is debited.

What does it mean to overpay for financial advice?

Overpaying is not just a matter of the fee being high. It is a gap between what you pay and what you understand you are receiving for it. If you cannot name your fee in dollars or describe what services it covers, you may be overpaying by default, regardless of the actual amount.

Is a flat fee always less expensive than an AUM fee?

No. For smaller portfolios, a percentage-based AUM fee can cost less in dollar terms than a flat fee. The break-even point depends on the specific flat fee and AUM rate involved. At Your Path Fi's $12,000 flat fee compared with a 1% AUM fee, the break-even is around $1.2 million. The full comparison across portfolio sizes is covered in the flat-fee-vs-AUM cost comparison post on this site.

What should I ask my current advisor about fees?

Ask four things: What is my total advisory fee in dollars this year? What services does that fee cover? Are there any additional costs, such as fund expenses, platform fees, or transaction fees? And how does this compare to a flat-fee model? A fiduciary advisor should be able to answer all four plainly.

How do I know if I'm overpaying my financial advisor?

Overpaying is not really about how high the fee is. It is the gap between what you pay and what you actually understand you are receiving for it. The practical signs are simple: you do not know your all-in cost in dollars, your advisor cannot clearly explain how that fee compares to alternatives like a flat fee, or you are paying a percentage of your portfolio but not getting tax planning or retirement-specific work such as Social Security and RMD guidance in return.

Is 1% too much to pay a financial advisor?

1% is the industry benchmark, according to Kitces Research's 2024 survey of 621 advisory firms, so it is not unusual on its own. Whether it is too much for you depends on what you actually receive in return, not just the number. On a $1.2 million portfolio, 1% AUM works out to $12,000 a year, the same as our flat fee, so the honest question is what each option includes for that price.