The five documented costs of financial advice — ranked by the evidence.

Cost No. 1 · Fees & product costs

The price of the advice itself Very strong

The most direct cost: an annual fee, commonly around 1% of assets, layered on the expense ratios of the underlying funds plus platform and trading costs. Because the fee is charged every year on a growing balance — and money paid in fees never compounds again — the lifetime cost dwarfs the annual percentage. A 1% fee on a $500,000 portfolio over 25 years at 7% removes roughly $560,000 — more than the original principal. Check the arithmetic with any calculator: $500,000 at 7% for 25 years is about $2.71M; at 6% net of the fee, about $2.15M. Two more translations worth memorizing: on a 7% expected return, a 1% fee is a seventh of everything you expect to earn — and at a 4% retirement withdrawal rate, it is a quarter of your annual retirement income. Run your own numbers.

The strongest single finding in this literature: Morningstar’s Russel Kinnel found the expense ratio was the best predictor of a fund’s future returns — better than Morningstar’s own star ratings. In Canadian household data, advised clients were paying over 2.7% per year all-in (Foerster, Linnainmaa, Melzer & Previtero, Journal of Finance, 2017) — enough to consume the entire equity risk premium.

And notice the fee’s shape: a percentage of your assets — a structure descended from sales commissions, under which the firm’s pay rises with the market and with every dollar it gathers, regardless of work performed. That shape is what manufactures Cost No. 3 below. Why is the fee a percentage at all?

The honest footnote: this channel is shrinking. Average fees are compressing (Cerulli 2025: roughly 1.25% at $100K toward about 0.66% at $10M+ — a projection for 2026), zero-commission trading is standard, and flat-fee models are growing. Which is exactly why you negotiate — the market already does.

Cost No. 2 · Active underperformance

The expensive products lose to the cheap ones Very strong

Independent of fees, the actively managed products most often recommended tend to underperform their benchmarks — and the longer you hold, the worse the odds. The SPIVA Year-End 2025 Scorecard: 79% of active U.S. large-cap funds trailed the S&P 500 in 2025 — the fourth-worst year in the scorecard’s 25-year history — and over 15 years, roughly nine in ten funds underperform (88–90% across recent scorecards), with no fund category showing a majority of active managers beating their benchmark.

It gets more uncomfortable. Research on advisors’ own personal portfolios (Linnainmaa, Melzer & Previtero, Journal of Finance, 2021) found they trade frequently, chase returns, favor expensive active funds, and under-diversify — in their own accounts, netting roughly −3% a year — and keep doing it after leaving the industry. Many aren’t lying to you. They sincerely believe it. The data doesn’t care.

The market has already voted: passive fund assets overtook active in 2023–24. The low-cost-index default isn’t contrarian anymore — it’s mainstream. An advisor charging extra for active management owes you a written answer to Question 7.

Cost No. 3 · Conflicts of interest

When their pay depends on what you buy Strong · aggregate contested

The mechanism is documented beyond argument: upfront variable-annuity commissions average around 6% and run as high as 16%, brokers earn more for selling higher-expense products, and sales are roughly four times more sensitive to broker pay than to investor interest (Egan, Ge & Tang, NBER). About 7% of advisers have misconduct records — over 15% at some firms — and certain firms appear to specialize in employing them (Egan, Matvos & Seru, Journal of Political Economy, 2019).

What’s contested is the economy-wide total. A 2015 White House economic analysis put conflicted retirement advice at roughly $17 billion a year; the industry disputed the extrapolation. We report the mechanism as fact and the aggregate as an estimate — that’s the difference between evidence and marketing.

And the regulatory context matters: the strongest fix — a full fiduciary rule for retirement advice — has now been struck down in court twice, most recently in 2026. “Best interest” is not fiduciary, and nobody is coming to close this gap for you. That’s why the Method makes you close it yourself, in writing.

Cost No. 4 · Tax inefficiency

The value competent advice should capture — and often doesn’t Strong

Two investors holding identical funds can end with materially different after-tax wealth, depending on which accounts hold which assets, when gains are realized, and how withdrawals are sequenced. Vanguard’s Advisor’s Alpha framework estimates asset location alone can add up to roughly 0.60 percentage points per year of after-tax return — an asset-manager estimate, best read as a situation-dependent upper bound.

This one cuts the other way: it’s forgone value, not a fee. It’s also the cleanest test of whether an advisor’s fee buys actual work. Ask Question 8 — an advisor who can’t describe what they actually do about asset location and loss harvesting isn’t doing it.

Cost No. 5 · The “behavior gap”

The famous number we refuse to inflate Contested

You’ve heard this one — it’s the industry’s favorite: “investors lose 1–2% a year to bad timing, and an advisor’s coaching saves you from it.” Morningstar’s Mind the Gap series estimates about 1.2 points a year; older DALBAR figures run similar; Vanguard attributes up to 1.5–2.0 points to “behavioral coaching.”

Here’s what the industry won’t tell you: a 2026 peer-reviewed paper in the Financial Analysts Journal (Fulkerson, Jordan, Riley & Yan) identified mathematical errors in the most-cited methodology and found that a claimed 1.7% gap, correctly computed, falls to about 0.03% — effectively zero. The defensible position is narrow: an individual who panic-sells in a crash suffers a real, personal loss — but the aggregate “behavior gap” marketed as a headline cost is far smaller than advertised, possibly near zero.

We rank it last on purpose. A site that inflated this number would sell more advice. Overstating a cost to sell a service is precisely the conduct this review exists to flag — no matter who’s doing it.