Am I paying too much for my financial advisor?

You cannot know whether you are paying too much for your financial advisor until you can state your all-in cost as one dollar figure and name the work it pays for. Too much means more than the same work costs elsewhere, all in. Most people I sit down with have never seen that figure, because the cost is split across an advisory fee, the expenses inside their funds, trading and platform charges, and the interest they are not earning on cash.

At Harvest Lane in Sandy, Utah, this is the question I hear most. This page is about finding your number and judging it, not about what advisors charge. A rate without the work behind it tells you nothing.

What am I actually paying?

The SEC’s framing is the right one: fees and expenses reduce the money in your portfolio that is earning a return, and you lose whatever that money would have earned.

• The advisory fee. What the firm charges for advice and management. The schedule, whether it is negotiable, and how and when it is billed are required disclosures in Item 5 of Form ADV Part 2A.
• Fund expenses. Every mutual fund and ETF charges its own operating expenses, shown in the prospectus fee table as management fees, 12b-1 fees, and other expenses, and totaled as the expense ratio. Sales loads come in addition.
• Trading, custody, and platform costs. Item 5 also requires an adviser to describe the other fees you may pay, such as custodian fees and brokerage costs. In a wrap fee program, one fee covers advice and trading, and often custody, instead of per-trade charges, and the sponsor owes you a separate wrap fee brochure, Form ADV Part 2A Appendix 1.
• Cash. Uninvested cash gets swept somewhere: a bank deposit program, a money market fund, or nowhere. The firm may pay little or no interest on it, and the gap never appears on your statement.

Add those up for the last twelve months, in dollars. That is your number. People argue with a percentage. Nobody argues with a dollar figure.

What should I be getting for it?

A fee is only too high relative to the work. Write down what you received last year: meetings, a plan anyone updated, tax coordination with your CPA, rebalancing, answers to your calls. Form ADV Part 2A is written in plain English and covers services, fees, conflicts, and disciplinary history, so you can compare the promise with the delivery.

If you pay a full management fee for a model portfolio that has not changed in three years, and the planning is an annual call, you are paying for a service you could describe in one sentence. That is not always wrong. It is wrong if you were told you were getting more.

How do I compare my advisor with anyone else?

Same services, all-in, nothing else.

The SEC’s IAPD site carries the brochure of every SEC-registered adviser and most state-registered ones, free, so you can read Item 5 for almost any firm. SEC-registered advisers and broker-dealers also give retail investors a relationship summary, Form CRS, which covers fees, costs, and conflicts, and suggests asking: "Help me understand how these fees and costs might affect my investments." Harvest Lane is state-registered, so its Form ADV brochure is where to look.

Cost is part of an adviser’s legal duty. The SEC’s interpretation of the fiduciary standard says cost is one of many important factors, that the duty does not necessarily mean choosing on cost alone, and that an adviser can recommend a costlier product or strategy only if it reasonably concludes other factors outweigh the cost and make it the better choice for that client. If your funds carry 12b-1 fees and your advisor’s firm keeps them alongside an advisory fee, without crediting them back, you are paying for distribution and for advice at once.

For the record, Harvest Lane is fee-only: no 12b-1 fees, no commissions, and an advisory fee that is tiered, as described in Form ADV Part 2A.

What are the signs I’m paying too much?

None of these settles it alone. Two or three together usually do.

1. You asked for your total cost in dollars and got a percentage, a shrug, or a brochure.
2. Your funds carry 12b-1 fees or sales loads, and your advisor’s firm also collects an advisory fee.
3. You are in a wrap program, paying for trading you rarely do.
4. The brochure says fees are negotiable, and nobody mentioned it.
5. You initiate every conversation.

What do I do if the answer is yes?

Two options.

Ask. Take your dollar figure and your list of services to your advisor and ask what the difference buys. A good advisor has an answer.

Get a second opinion. Have a fee-only reviewer check your number from the same statements and tell you what should change, if anything. Nothing has to move, and your advisor does not need to know. Mine is complimentary: send the statements and I will run the number.