Our Advice on Managing Your Investments Without Paying Too Much for Financial Advice
You may need financial advice, but that does not automatically mean you need to hand over 1% of your portfolio every year.
There are more ways than ever for Americans to manage their investments without paying a traditional wealth manager an ongoing percentage of their assets. The right choice can range from doing everything yourself to hiring a financial planner by the hour, using a lower-cost automated service, working with a commission-based professional, or paying a full-service wealth manager.
The important question isn’t simply, “Who charges the lowest fee?”
It is: “What am I getting for what I’m paying?”
Investment advisory fees can be charged as a percentage of assets, a subscription, a flat fee, or another arrangement. Those costs matter because even seemingly small annual fees can add up significantly over decades.
Here are the primary ways to manage your money while controlling what you pay.
Compare Your Investment Management Options
| Approach | How You Pay | Biggest Advantage | Biggest Disadvantage | Best For |
|---|---|---|---|---|
| DIY Investing | Investment expenses only | Very low advice cost | You are responsible for decisions | Knowledgeable and disciplined investors |
| Robo-Advisor | Low asset-based or subscription fee | Automated portfolio management | Less customization | Investors with simple financial situations |
| Target-Date or Balanced Fund | Fund expenses | Simple and hands-off | Limited personalization | Retirement savers wanting simplicity |
| Flat-Fee Planner | Fixed planning fee | Cost is not automatically tied to portfolio size | You may have to implement the recommendations yourself | Investors who primarily need a financial plan |
| Hourly Advisor | Hourly fee | Pay only when you need advice | Hourly costs can accumulate | People with specific financial questions |
| Subscription Planner | Monthly or annual fee | Ongoing advice without traditional AUM pricing | Services may be limited | People wanting recurring financial planning |
| Low-Cost AUM Advisor | Percentage of assets | Professional management | Your fee generally increases as your portfolio grows | Investors wanting to delegate portfolio management |
| Commission-Based Professional | Product or transaction compensation | May not require a separate advisory invoice | Potential conflicts and product costs | Insurance or transaction-specific needs |
| Traditional Wealth Manager | Usually an asset-based fee | Potentially comprehensive financial management | Can become expensive as assets increase | People with complex financial situations |
| Hybrid Approach | Combination of DIY and professional advice | Can substantially reduce ongoing costs | Requires personal involvement | Investors comfortable handling some decisions themselves |
| MYGA | Product economics and insurance company compensation | Fixed interest rate and principal protection | Limited liquidity during the guarantee period | Conservative retirement money |
| Fixed Indexed Annuity | Product economics and insurance company compensation | Principal protection with index-linked interest potential | Caps, spreads, participation rates, and surrender periods may apply | Conservative retirement investors |
1. Manage the Portfolio Yourself
DIY investing is the cheapest method from an advisory-fee standpoint because you aren’t paying someone to make ongoing decisions for you.
You could build a portfolio using broad-market index funds, ETFs, a traditional three-fund portfolio, target-date funds, factor-based strategies, bonds, or income-oriented investments.
You can also use online investment communities such as Reddit, Facebook, and YouTube for education, but they shouldn’t be treated as personalized financial advice. Nobody posting in a forum knows your complete tax situation, retirement income needs, risk tolerance, Social Security strategy, healthcare costs, or estate plan.
- Pros: You maintain complete control, eliminate ongoing advisory fees, and can build an extremely inexpensive portfolio.
- Cons: You are responsible for asset allocation, rebalancing, tax decisions, withdrawals, risk management, and your own behavior when markets fall.
- Who could benefit: Someone who understands investing, stays disciplined during market downturns, and doesn’t need significant financial hand-holding.
- Who might not benefit: Someone who panics during volatility, doesn’t understand investments, has a complicated tax situation, or needs help coordinating retirement income.
2. Use a Robo-Advisor
A robo-advisor automates much of the investment-management process.
You typically answer questions about your goals, time horizon, and risk tolerance. The platform then builds and manages an investment portfolio, usually using ETFs or similar investments.
- Pros: Low cost, automatic rebalancing, easy implementation, and very little work.
- Cons: You may not receive the same level of retirement-income, tax, insurance, or estate-planning help available through a human advisor.
- Who could benefit: Investors with relatively straightforward financial situations who don’t want to manage everything themselves.
- Who might not benefit: People with complicated retirement, business, tax, estate, or income-planning needs.
3. Use a Target-Date Fund or Simple Portfolio
You don’t necessarily need an advisor to maintain diversification.
A target-date fund automatically adjusts its investment allocation as you move closer to a targeted retirement year. Another alternative is a simple portfolio of broad stock and bond index funds.
Mutual funds and ETFs still have expenses, so don’t confuse “no advisor” with “no cost.”
- Pros: Simple, inexpensive, diversified, and relatively easy to maintain.
- Cons: Limited personalization and little help with retirement-income or tax planning.
- Who could benefit: Investors primarily focused on accumulating retirement savings.
- Who might not benefit: Retirees who need help turning their savings into a reliable income strategy.
Accumulating $1 million is different from determining how much of that $1 million you can safely spend during retirement.
4. Hire a Flat-Fee Financial Planner
Instead of paying someone a percentage of your portfolio every year, you can hire someone to create a financial plan for a predetermined price.
For example, the advisor might analyze your investments, retirement income, Social Security, taxes, and insurance and tell you what changes should be considered.
You then implement the recommendations yourself.
- Pros: You know what you’re paying, and the cost isn’t automatically tied to the size of your portfolio.
- Cons: The advisor may not continuously manage your investments after delivering the plan.
- Who could benefit: Investors who want professional direction but don’t need somebody managing their portfolio every day.
- Who might not benefit: Someone who wants ongoing portfolio management and regular investment decisions handled for them.
5. Pay an Advisor by the Hour
Think of this like hiring an attorney or CPA.
Instead of turning over your investments indefinitely, you pay a professional for the amount of time required to answer your questions.
You might hire them to review your allocation, analyze your retirement plan, evaluate a Roth conversion strategy, determine whether you can retire, or give you a second opinion.
- Pros: You only pay for the help you actually need.
- Cons: Hourly costs can add up, and you remain responsible for implementing the recommendations.
- Who could benefit: Investors who have specific questions or want occasional professional guidance.
- Who might not benefit: Someone who needs continuous investment management or frequent financial planning assistance.
The hourly cost can look expensive, but paying several thousand dollars periodically could still be substantially cheaper than paying an AUM fee for decades.
6. Use Subscription-Based Financial Planning
Another option is paying a monthly or annual subscription for access to financial planning.
This can work particularly well for people who need recurring financial advice but don’t need someone actively managing their entire investment portfolio.
Before signing up, determine exactly what the subscription includes.
- Investment management
- Tax planning
- Retirement projections
- Insurance analysis
- Social Security planning
- Unlimited calls or meetings
- A limited number of annual consultations
Cheap isn’t valuable if the service doesn’t actually solve your problem.
7. Find a Lower-Cost AUM Advisor
Not every investment advisor charges the same percentage.
Some firms charge substantially less than 1%, especially as account balances increase or when the investment strategy is relatively standardized.
This gives you professional management without necessarily paying full-service wealth-management pricing.
- Pros: Professional portfolio management at potentially lower costs.
- Cons: The service may be more standardized or cookie-cutter than a traditional full-service relationship.
- Who could benefit: Investors who want someone else managing their money but still care about keeping costs down.
- Who might not benefit: People who need extensive tax, estate, business, insurance, and retirement-income planning.
Make sure you understand whether you’re receiving personalized financial planning or primarily portfolio management.
8. Use Commission-Based Advice When It Makes Sense
Commission-based compensation isn’t automatically bad, and fee-based compensation isn’t automatically good.
The important thing is understanding how everybody gets paid.
Depending on the investment or insurance product, compensation can come from commissions, sales charges, spreads, or compensation paid by an insurance company or financial institution.
For example, insurance agents may receive commissions from insurance companies for placing products such as annuities or life insurance.
That can mean there is no separate asset-management bill to the consumer, but it doesn’t necessarily mean the transaction has zero economic cost.
- Pros: You may be able to receive help without paying an ongoing percentage of your entire portfolio.
- Cons: Compensation can create incentives to recommend one product over another.
- Who could benefit: Consumers shopping for specific insurance products or transaction-based financial solutions.
- Who might not benefit: Investors who want completely product-neutral ongoing portfolio advice.
The correct question is whether the product is competitive and appropriate after considering compensation, guarantees, liquidity, restrictions, and alternatives.
9. Use Your CPA or Tax Professional Strategically
If you’re already paying a CPA or tax advisory firm, ask what planning services they provide.
A tax professional can be particularly useful when evaluating Roth conversions, capital gains, retirement-account withdrawals, business income, charitable strategies, and estimated taxes.
- Pros: Tax planning can be coordinated directly with your financial decisions.
- Cons: Tax expertise doesn’t automatically equal investment expertise.
- Who could benefit: Investors with significant tax-planning concerns.
- Who might not benefit: Someone who expects their tax preparer to provide comprehensive investment management without confirming that they offer those services.
You may ultimately want your CPA, investment professional, and insurance professional working together rather than expecting one person to be an expert at everything.
10. Use an Advisor Once a Year Instead of Every Day
This is one of my favorite middle-ground solutions.
Manage your investments yourself throughout the year and hire financial advisors periodically for a financial checkup.
Have them review your portfolio, retirement projections, withdrawal rate, insurance, Social Security, taxes, and estate-planning needs.
- Pros: You receive professional oversight without automatically paying someone an ongoing percentage of everything you’ve accumulated.
- Cons: You are still responsible for managing and implementing your strategy between reviews.
- Who could benefit: Experienced investors who want a second set of eyes on their financial plan.
- Who might not benefit: Someone who doesn’t want responsibility for managing their investments.
11. Pay a Traditional Wealth Manager When the Service Justifies It
There are situations where paying an ongoing advisory fee makes perfect sense.
If you’re receiving investment management, tax coordination, retirement-income planning, estate planning, behavioral coaching, charitable planning, business planning, and ongoing advice, the relationship could provide substantial value.
The problem occurs when someone is charging approximately 1% to put you into a basic allocation that could potentially be reproduced inexpensively elsewhere.
- $1 million portfolio at 1%: $10,000 per year
- $2 million portfolio at 1%: $20,000 per year
- $3 million portfolio at 1%: $30,000 per year
And those fees continue every year.
- Pros: Comprehensive professional management and potentially extensive financial planning.
- Cons: Asset-based fees can become expensive as your portfolio grows.
- Who could benefit: Investors with complicated finances who want to delegate most financial decisions.
- Who might not benefit: Someone with a simple portfolio who is comfortable managing investments independently.
You should know exactly what you’re receiving in exchange for the fee.
Be Extremely Careful With High-Fee Variable Annuities
This is one area where costs deserve serious scrutiny.
Variable annuities can combine insurance expenses, administrative expenses, underlying investment expenses, and charges for optional living or death-benefit riders.
Depending on the contract and optional benefits selected, total expenses can become substantial.
That doesn’t mean every variable annuity is automatically bad.
It means that if you’re paying 3%, 4%, or more after everything is included, there had better be a very compelling reason why those guarantees and benefits are worth the cost.
Otherwise, there may be much cheaper ways to accomplish the same objective.
- Pros: Can combine market-based investment options with certain insurance guarantees.
- Cons: Fees can be complicated and expensive, and surrender charges may restrict liquidity.
- Who could benefit: Someone who specifically needs the guarantees offered by a particular variable annuity and understands the total cost.
- Who might not benefit: Cost-conscious investors who could accomplish their investment and income goals using simpler alternatives.
What About the Conservative Portion of Your Portfolio?
This is where insurance products can sometimes reduce ongoing management costs.
Multi-Year Guaranteed Annuities
A multi-year guaranteed annuity, or MYGA, provides a declared interest rate for a specified period.
It can function similarly to a CD from a planning standpoint, but it is an insurance contract rather than a bank deposit and is not FDIC insured .
You choose a fixed term, and the insurance company guarantees a fixed interest rate for that term, subject to the terms of the contract.
- Pros: Fixed interest rate, principal protection, tax-deferred growth, and typically no annual investment-management fee.
- Cons: Surrender charges may apply, liquidity can be limited, and guarantees depend on the insurance company’s claims-paying ability.
- Who could benefit: Conservative investors who want predictable interest and don’t need complete access to the money during the term.
- Who might not benefit: Investors who need full liquidity or want significant stock-market growth potential.
Fixed Indexed Annuities
A fixed indexed annuity can credit interest based partly on the performance of a market index without directly investing your contract value in that index.
If the index performs poorly during a crediting period, you generally don’t lose contract value because of that negative index performance. Instead, you may simply receive no indexed interest for that period, subject to the contract’s terms.
However, fixed indexed annuities aren’t magic.
Participation rates, caps, spreads, and other crediting rules can limit the interest you receive. Surrender charges can also apply if you withdraw more money than the contract permits.
- Pros: Principal protection from market-index losses, tax-deferred growth, and the potential for higher interest than a traditional fixed-rate product.
- Cons: Returns are limited by crediting rules, and surrender periods can restrict access to your money.
- Who could benefit: Conservative retirement investors who want growth potential without directly exposing that portion of their savings to market losses.
- Who might not benefit: Investors seeking maximum stock-market growth or complete liquidity.
I view fixed and fixed-indexed annuities primarily as conservative retirement tools, not replacements for an entire investment portfolio.
They can potentially replace portions of a bond or CD allocation for investors who want principal protection, predictable interest, or guaranteed retirement income.
Annuities are insurance contracts, and guarantees depend on the issuing insurance company’s claims-paying ability. State Guaranty Association protection may also apply subject to your state’s limits and eligibility requirements.
What We Wouldn’t Consider “Safe” Just Because It’s Cheap
Bonds can absolutely belong in a conservative portfolio, but bond values can fluctuate when interest rates and market conditions change.
Commodities are another matter. Gold, oil, and commodity indexes can be volatile.
I wouldn’t classify commodities as a substitute for a fixed annuity, CD, or other principal-protection strategy simply because they’re inexpensive to purchase.
Cheap and safe aren’t the same thing.
Other Insurance That Can Protect Your Investment Plan
Your investment strategy can be excellent and still get damaged by a financial risk that the portfolio wasn’t designed to absorb.
Long-Term Care Insurance
Long-term care insurance can help protect retirement assets from potentially significant home healthcare, assisted-living, or nursing-home expenses.
- Who could benefit: Retirees who have assets they want to protect and don’t want their spouse or children responsible for providing all of their care.
- Who might not benefit: Someone who can comfortably self-fund a significant long-term care event or qualifies for another source of coverage.
Life Insurance
Life insurance can provide liquidity for spouses, children, business partners, or other beneficiaries instead of forcing investment assets to accomplish every estate-planning objective.
- Who could benefit: Someone with a spouse, dependent, business, debt, estate-planning need, or legacy goal.
- Who might not benefit: Someone with no financial dependents or legacy objectives and enough assets to cover final expenses.
Disability Insurance
Disability insurance can be extremely important for working Americans because your future earning ability may be substantially more valuable than your current investment portfolio.
- Who could benefit: Working individuals who depend on their income to save for retirement and pay household expenses.
- Who might not benefit: Someone who is already retired or financially independent enough that losing employment income wouldn’t affect their financial plan.
Insurance and investments shouldn’t compete with each other. They solve different problems.
Investments primarily help grow and distribute wealth.
Insurance primarily transfers risks that you don’t want your portfolio absorbing by itself.
Who Should Pay for Professional Management?
Professional management can become more valuable when you have multiple retirement accounts, substantial taxable investments, complex tax planning, a business, stock options, estate-planning concerns, significant retirement-income needs, or simply don’t want responsibility for managing the portfolio yourself.
It may also be worthwhile for someone who repeatedly makes emotional investment decisions.
Saving 0.75% in fees doesn’t help much if you panic during a bear market and sell your portfolio at the bottom.
Who Probably Doesn’t Need a Traditional Wealth Manager?
Someone with a straightforward financial situation, a simple diversified portfolio, strong investment knowledge, and the discipline to stay invested may not need to pay an advisor an ongoing percentage of their assets indefinitely.
A flat-fee plan, hourly consultation, robo-advisor, annual financial checkup, or DIY approach could potentially accomplish what they need for substantially less.
Our Advice
Don’t automatically choose the cheapest financial professional.
And don’t automatically assume the most expensive advisor is better.
Figure out what problem you’re paying them to solve.
If all you need is portfolio allocation, you have many inexpensive options.
If you need comprehensive retirement, tax, and estate coordination, paying more can make sense.
And if part of your retirement portfolio needs principal protection, fixed interest, or guaranteed lifetime income, compare annuities separately from your investment-management relationship.
You don’t necessarily need to pay an AUM fee on money whose primary job is to provide insurance guarantees.
Most importantly, shop around.
The annuity available through one wealth-management firm may be completely different from the contracts available through an independent insurance agency.
Compare insurance companies, financial strength ratings, guaranteed interest rates, lifetime income payouts, death benefits, surrender periods, free-withdrawal provisions, crediting methods, participation rates, caps and spreads, rider fees, and State Guaranty Association protection before signing anything.
Compare Your Options Before You Pay Someone for Decades
At The Annuity Expert, we’re an independent annuity broker and insurance agency helping consumers across the United States compare annuities, retirement-income strategies, life insurance, and long-term care coverage.
If you’re trying to determine whether part of your portfolio should remain invested, move into a fixed or fixed indexed annuity, or be structured to produce guaranteed retirement income, contact The Annuity Expert for free quotes and comparisons. There is no obligation to purchase coverage.
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