Financial Advisor Fee Calculator

Many healthcare professionals reach a point where they want help with money — a busy schedule, a growing portfolio and complicated decisions make it tempting to hand off. Before you do, it's worth understanding how advisory fees work, because the way you pay matters as much as how much. This calculator compares a percentage-of-assets (AUM) fee with a flat annual fee over time.

What this calculator does

Enter your current portfolio, how much you add each year, your expected return before fees, the AUM fee, a flat-fee alternative, your fund expense ratio and the number of years. It shows:

• the cost of the AUM fee compared with the flat fee over the full period,
• your ending portfolio under each option, and
• this year's AUM fee in dollars.

The chart shows the two portfolios side by side.

The formula in plain English

AUM path. Each year, add your new savings, then grow the balance at your return minus the fund expense ratio minus the AUM fee.

Flat-fee path. Each year, add your new savings, grow the balance at your return minus the fund expense ratio, then subtract the flat fee. The calculator raises the flat fee by 3% a year to keep pace with inflation.

Cost of the AUM fee = flat-fee ending value − AUM ending value.

Because an AUM fee is a percentage, it grows as your portfolio grows, and the money paid in fees also loses all its future growth. That's why the gap widens over time.

A worked example

Dr. Abrams and her husband have $500,000 invested and add $50,000 a year. They expect a 7% return, use index funds costing 0.1%, and are weighing a 1% AUM advisor against a flat-fee planner at $4,000 a year.

• This year, the AUM fee would be about $5,500 — not far from the flat fee.
• After 25 years, the AUM path ends at about $4.96 million and the flat-fee path at about $5.65 million.
• The difference is about $694,000.

The fees look similar today. Over a career, they don't.

Why it matters at each career stage

If you're: Resident / fellow

You probably don't need ongoing portfolio management yet. If you want help, a one-time plan from an advice-only planner covering loans, insurance and a starter investment plan can be a good value.

If you're: Employed

This is when portfolios grow quickly and AUM fees start to bite. Ask any advisor for their total cost in dollars per year, not just a percentage, and ask what they'll do for that fee.

If you're: Practice owner

Owners often need tax, retirement plan and business advice. Make sure your advisor's skills match those needs, and compare AUM pricing with a flat retainer that covers the same work.

Fees you might not see

Advisory fees aren't the only costs. Fund expense ratios, trading costs, commissions on insurance or annuity products, and wrap fees all reduce your return. A portfolio of actively managed funds at 0.75% plus a 1% advisory fee costs 1.75% a year — on a $1 million portfolio, that's $17,500. Ask for a written summary of every cost, and enter the combined fund costs in the expense ratio field to see the full picture.

Questions to ask any advisor

1. Are you a fiduciary at all times, in writing?
2. How are you paid — fees, commissions, or both?
3. What will I pay in dollars this year, including fund costs?
4. What exactly is included: tax planning, insurance, student loans, estate planning?
5. Will my fee rise as my portfolio grows, even if the work doesn't?

A fair advisor will answer each one clearly.

See how steady investing compounds with the compound growth calculator, and set your long-term target with the FI number calculator.