Financial Advisor Fees vs. Self-Directed Investing: Structuring Your Wealth Strategy 

When building wealth, investors generally face a primary choice: paying financial advisor fees for professional guidance or embracing self-directed investing to manage their own portfolios. Financial advisor fees compensate experts for comprehensive planning and ongoing management, typically charged as a percentage of your assets or a flat rate. Conversely, self-directed investing empowers individuals to control their assets directly using modern financial platforms to research, build, and execute their own strategy.  

Regardless of the path you choose, as the CEO of your financial life, you are responsible for setting your goals and executing your strategy. But even the most capable leaders rarely operate in a vacuum. They often consult specialized experts, tax professionals, and legal counsel to help navigate complex financial terrain.  

Financial advisors can provide immense value, offering personalized planning, behavioral guidance, and strategic foresight. For investors evaluating their wealth management approach, the objective is to understand the different service models available and structure a relationship that aligns with their specific financial goals and preferred level of involvement. 

Whether you choose a fully advised model or prefer to manage your own portfolio using modern financial tools, understanding the landscape of financial services can help you make an informed decision about your wealth. 

What are typical financial advisor fees? 

Financial advisors typically charge between 1% and 2% of assets under management (AUM) annually, though fees vary widely depending on the advisor and the services provided. Additionally, they may use a flat hourly rate or project fee. Understanding these structures helps investors evaluate the professional guidance, comprehensive financial planning, and personalized strategy they receive in return. 

When partnering with a professional, clarity around compensation is essential. The AUM model is widely used in the industry because it naturally scales with your portfolio. Because these fees are often deducted automatically, it is important to understand how they are calculated.  

For example, if you have a $500,000 portfolio, a 1% AUM fee equates to $5,000 a year. If that portfolio grows to $2 million, the 1% fee can become $20,000 annually. However, it’s common for financial advisors to lower their fees once your portfolio reaches a certain threshold. In exchange for this fee, full-service advisors typically provide ongoing portfolio management, financial planning, and personalized behavioral coaching during periods of market volatility. 

Self-Directed Investing vs Financial Advisor: Which is right for you? 

Choosing between self-directed investing and a financial advisor depends on your financial complexity and desire for control. A fully advised model offers comprehensive wealth management. Self-directed investing utilizes platforms for efficient execution. A hybrid approach combines self-management with periodic professional guidance. 

Investors generally choose from three primary models for managing their wealth: 

	Fully Advised	Hybrid	Self-Directed
The Model	You partner with an advisor who handles asset allocation, ongoing portfolio maintenance, and long-term financial planning.	You control your investments using a self-directed platform, but you hire a professional for a specific scope of work, such as a yearly portfolio review.	You build your own system. You determine your asset allocation and use modern financial platforms to automate your deposits and execute your strategy.
The Investor	Individuals with highly complex financial lives (such as navigating business equity, trusts, or multi-generational estate planning) who value professional oversight and personalized guidance.	Investors who are comfortable executing their day-to-day strategy but want a professional “second opinion” to help stress-test their long-term plans.	Tech-forward investors who enjoy conducting their own research and prefer a hands-on approach to managing their wealth.
The Trade-offs	You pay an ongoing fee (such as an AUM percentage) in exchange for customized strategy, time savings, and human expertise.	You assume the responsibility of ongoing portfolio management while accessing professional advice only when you feel it is necessary.	You may avoid advisory fees, potentially leaving more capital in your account. However, self-directed investing requires ongoing education, oversight, and discipline.

Please note: All investing involves risk, including the potential loss of principal. 

How do AUM and flat-fee advisor compensation models compare? 

The Assets Under Management (AUM) model charges a percentage of your portfolio, aligning the advisor’s compensation with your account’s potential growth. The flat-fee or hourly model charges a set price for specific services, offering an alternative for investors seeking targeted, occasional professional advice. 

How you pay for financial advice often determines the structure of the relationship.  

The AUM model aligns the advisor with the goal of growing your overall account value over time. This model is often ideal for investors who want a dedicated partner actively monitoring their wealth year-round.  

Alternatively, the hourly or project-based model allows you to pay a flat fee for specific deliverables, such as the creation of a comprehensive financial plan. This model is often favored by self-directed investors who prefer to execute the strategy themselves but still want access to professional expertise. 

How can automation support a self-directed investment strategy? 

Automation supports a self-directed investment strategy by executing your pre-set instructions systematically. Features like scheduled trade windows and dynamic rebalancing help maintain your target asset allocation over time, reducing the need for manual adjustments and helping you stay focused on long-term goals. 

While a financial advisor provides personalized behavioral coaching and human guidance during market volatility, self-directed investors must rely on their own discipline.  

To help maintain this discipline, self-directed investors can utilize platform automation to streamline their execution: 

• Trade Windows: By consolidating executions into specific, scheduled times, trade windows help self-directed investors implement their strategy systematically, potentially reducing the temptation to react to daily market noise. 

• Dynamic Rebalancing: As market movements cause a portfolio to drift from its target allocation, automated systems can strategically direct new deposits to help bring the portfolio back in line with the investor’s original intent. 

When should you consider hiring a financial advisor? 

You might consider hiring a financial advisor during major life transitions or complex liquidity events. Situations like marriage, inheritance, business exits, or retirement often introduce complicated planning needs where the personalized, strategic guidance of a professional can be highly valuable. 

Your financial needs will evolve as your life changes. While self-directed tools are excellent for execution, certain milestones often warrant the expertise of a professional advisor: 

• Marriage or divorce: Navigating the merging or separating of complex balance sheets.  

• Inheritance: Managing a sudden capital influx and its broader financial implications.  

• Business exit: Structuring a windfall for potential long-term preservation.  

• Retirement: Shifting a portfolio’s objective from an “accumulation” phase to an income-generating “decumulation” phase. 

This content is for informational purposes only and does not constitute tax or legal advice. Please consult a qualified professional for specific guidance regarding your unique situation. 

How does M1 support wealth-builders? 

M1 provides self-directed investors with tools to automate the execution of their long-term financial strategies. Whether you manage your own portfolio or work alongside a fee-based advisor, M1 offers a platform designed to streamline systematic investing, dynamic rebalancing, and ongoing portfolio maintenance. 

M1 was designed for investors who think in decades, not days. If you are a self-directed investor, M1 gives you complete control over your strategy while automating the ongoing maintenance. You decide what to buy, and the platform handles the execution to help keep your portfolio aligned with your overarching plan.  

If you are working with an hourly or fee-based advisor to build your financial plan, M1 can serve as your execution layer—a robust, cost-effective platform built around your long-term goals.  

The fee structure is straightforward: $3 a month for balances under $10,000. If you maintain more than that on the platform, the platform fee is waived. Other fees may apply. For a complete list of fees M1 may charge, visit M1 Fee Schedule.   

Whether you partner with an advisor for comprehensive wealth management, consult one occasionally, or go fully self-directed, M1 puts you in charge of your financial destination while providing the tools to help you stay on course. 

Frequently Asked Questions 

Disclosures

M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. 

All investing involves risk, including the risk of losing the money you invest. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc. 

SAIF-03192026-8sn71mdo