Free tool
Advisor fee calculator: AUM vs. flat fee
Financial advisors charge in different ways. Many bill a percentage of the assets they manage (an "AUM" fee) every year; others charge a flat annual fee or an hourly rate. This calculator turns those different structures into the one number that matters — the total dollars they cost you over time, including the investment growth you give up on every dollar paid in fees.
What each fee structure costs
Figures are rounded to the nearest dollar. "Fees paid" is the sum of every annual fee over the time horizon; "ending value" is what the portfolio is worth after those fees are removed each year. The gap between the two ending values is larger than the gap in fees paid — that extra amount is the growth you would have earned on the fees, had they stayed invested.
How this calculator works
No hidden assumptions — here is exactly what the math does.
The calculator runs your portfolio forward one year at a time, applying the same three steps to each fee structure so the only difference between them is how the fee is charged:
- Add your annual contribution to the balance at the start of the year.
- Apply the expected annual growth rate to that balance.
- Deduct that year's fee. For the AUM model, the fee is the AUM percentage times the year-end balance. For the flat model, it is the flat dollar amount (or your hourly rate times hours per year), which does not change as the balance grows.
Because the fee is taken out of the portfolio each year, the money paid in fees is no longer invested — so it stops compounding. This is why the difference in ending portfolio value is bigger than the difference in total fees paid: the AUM structure not only costs more in fees on a growing balance, it also costs the investment growth those extra fees would have earned.
The key structural difference: an AUM fee rises automatically as your portfolio grows, even if the amount of advice you receive stays the same. A flat or hourly fee is tied to the work performed, not the size of your account, so it does not climb just because your balance does.
What this calculator does not do
- It ignores taxes. Fees, withdrawals, and investment gains can all have tax consequences that are not modeled here.
- The growth rate is a flat assumption. Real returns vary year to year and are never guaranteed. A single steady rate is a simplification for illustration.
- It simplifies fee timing. AUM fees are often billed quarterly on an average balance; here the fee is calculated once per year on the year-end balance. Flat and hourly fees are treated as a single annual charge.
- It does not judge value. A higher fee can be worth it if it buys advice you need. The calculator shows cost, not whether a service is worth its price.
Want advice without the percentage?
Advice-only planners charge for their advice directly — a flat fee, an hourly rate, or a project fee — and never take a percentage of your portfolio or earn commissions on what you buy. If you want to understand the model first, start with what advice-only means. When you are ready, you can find a flat-fee, advice-only financial advisor in our directory.