How to Evaluate Your Financial Advisor in 30 Minutes

Every couple of years, it's worth running a quick check on what you're actually getting from your financial advisor.

You can do it this weekend, with a recent statement and a calculator. The point isn't to fire anyone. The point is to see the relationship clearly — what you're paying, what you're being given, and whether the answers you get back to three direct questions match what you assumed they would.

Here's the 30-minute version.

Step 1: Calculate What You're Actually Paying

Pull your most recent statement. Find the portfolio's market value and the advisor fee — usually quoted as a percentage of assets under management. For most relationships, it's somewhere between 0.75% and 1.25%.

That percentage is one number you're paying. There's another.

Look at the fund-level expense ratios for everything inside the account. Each mutual fund and ETF charges its own management fee — sometimes a few basis points (0.03%), sometimes much more (0.75%+). Your real cost is the advisor fee plus the weighted average of those fund expenses.

Here's what that looks like on a $1M portfolio with an advisor fee of 1.00% and weighted fund expenses of 0.40%:

• Advisor fee: $10,000 per year

• Weighted fund expenses: $4,000 per year

• All-in cost: $14,000 per year

Now annualize. If that $14,000 had stayed invested and earned a 6% net return, ten years of those fees compound to roughly $185,000 of foregone growth. Not the fees themselves — the growth those fees would have produced had they remained in the account.

If the portfolio is closer to $500K, halve the numbers. If it's $2M, double them.

The math doesn't get less significant when the portfolio gets larger. It gets more.

Step 2: Look at What You Own

While you have the statement open, look at what's actually in the account.

A few patterns worth recognizing:

Mostly low-cost index funds. Vanguard, iShares, Schwab, Fidelity index series. Expense ratios in the 0.03%–0.20% range. Transparent, tax-efficient, hard to argue with for the core of a portfolio. If this is most of what you see, the fund layer is doing well.

Target-date funds inside a managed advisory account. Fine for a hands-off 401(k). Strange to see in an account where someone is being paid 1% to manage allocation. The target-date fund is doing most of the allocation work the advisor is being paid to do — and the target-date wrapper itself charges another 0.40%–0.60% on top of the funds it holds.

"Proprietary" funds. Funds branded with the advisor's firm name. Sometimes these are legitimate, low-cost vehicles. Often they're fund-of-funds — a wrapper that holds other people's funds and adds a layer of fees on top. Look up the expense ratio. If it's above 0.50%, the wrapper is doing the work; ask what that layer is buying you.

A pile of individual mutual funds with expense ratios above 0.75%. A flag worth examining. The case for high-expense active management has narrowed considerably over the last fifteen years. If the portfolio is full of these, there's either a specific reason (a strategy, a thesis, a tax position) or there's a compensation structure inside the funds that isn't visible on your statement.

You're not drawing conclusions yet. You're gathering observations.

Step 3: Ask Three Direct Questions

Send your advisor an email or a text. The exact wording doesn't matter — the substance does.

1. What's the all-in cost of working with you, including the expense ratios of every fund in my portfolio?

The answer should be a specific number, ideally in writing. If the answer is vague, deflective, or limited to the advisor fee only, that's information. A confident advisor knows the all-in cost off the top of their head, or can produce it within a day.

2. What planning decisions outside of investments have we addressed in the last 12 months?

If the answer is "we rebalanced the portfolio" or "we held the quarterly review," that's not planning. That's portfolio management with a meeting around it. Real planning produces decisions outside the portfolio: estate updates, insurance changes, tax-aware moves, coordination with the CPA or attorney, scenario analysis on something specific in your life. If none of that has happened in twelve months, the relationship is an asset management relationship — which is fine, as long as that's what you're paying for and that's what you wanted.

3. Walk me through why my portfolio is allocated the way it is — specifically, why these particular funds versus lower-cost alternatives in the same categories.

You're looking for a real answer, not a script. A confident advisor can explain the construction logic — why these asset classes, why this geographic mix, why this fund over its peers, why some of the funds aren't the cheapest in their category if that's the case. If the answer is "this is our firm's model portfolio," that's not an answer about your portfolio. That's an answer about the firm's defaults.

What to Do With What You Find

You're not making a decision today. You're gathering information.

After the exercise, one of three things will be true.

The numbers are reasonable, the planning is real, and the answers to the three questions came back clear and substantive. That's a relationship worth keeping. Most people don't have one.

Some of the numbers concerned you, but the relationship is mostly working. Bring it up directly. A good advisor welcomes the conversation. The ones who get defensive when asked direct questions are usually the ones who can't answer them.

The exercise revealed gaps you didn't know were there. Two paths from here: have an honest conversation with your current advisor about what's missing, or start looking for a relationship that does what this one isn't.

Either way, you'll walk out of the 30 minutes with more information than you walked in with.

That's the whole point.