Yes, you can pay someone to trade stocks for you, and it is a common, legal arrangement. Your options range from robo-advisors charging about 0.25% of your portfolio each year to human advisors around 1% or more, and the legal mechanism that lets them act is a limited power of attorney granting trading authority over your account without letting them withdraw your cash. The important work happens before you sign: knowing which legal standard your manager owes you, what you will actually pay, and how to confirm the person is registered.
Who Can Legally Trade Your Account
Anyone who accepts compensation to manage your securities must be registered. Registered Investment Advisers (RIAs) register with the Securities and Exchange Commission or a state securities regulator under the Investment Advisers Act of 1940. Broker-dealers and their representatives are overseen by the Financial Industry Regulatory Authority (FINRA), and individuals must pass qualifying exams such as the Series 7 for general securities and the Series 65 for investment adviser law.1FINRA.org. Qualification Exams These are legal prerequisites, not optional badges. Willful violations of the Advisers Act can bring a fine of up to $10,000, imprisonment for up to five years, or both.2Office of the Law Revision Counsel. 15 US Code 80b-17 Penalties
The category you choose determines the legal duty you’re owed. An RIA owes you a fiduciary duty: a duty of care and a duty of loyalty that requires putting your interests ahead of the adviser’s at all times, and disclosing conflicts of interest while still acting in your favor.3SEC.gov. Commission Interpretation Regarding Standard of Conduct for Investment Advisers A broker-dealer works under Regulation Best Interest, which requires acting in your best interest when making a recommendation, disclosing material conflicts, and exercising reasonable diligence.4eCFR. 17 CFR 240.15l-1 Regulation Best Interest The practical difference: a fiduciary must avoid or resolve conflicts in your favor; a broker must disclose them and not put their interests ahead of yours on a given recommendation. If you want the higher standard, hire an RIA.
You also choose how much control you keep. In a discretionary account, the manager buys and sells without calling you first. In a non-discretionary account, they need your approval on each trade.5Justia. Unauthorized Trading of Securities and Legal Remedies for Investors Most people who hire someone specifically to run their portfolio choose discretionary, since the point is to stop watching the ticker.
What You Will Actually Pay
The dominant pricing model is an assets under management (AUM) fee, charged as a percentage of your portfolio each year. Robo-advisors generally charge 0.25% to 0.50%. Human advisors traditionally charged about 1%, though competitive pressure has been pulling that lower for larger accounts. Expect a range of roughly 0.25% to 1.25% depending on service level and account size.
Some advisors bill a flat annual retainer, often between $2,500 and $9,200, with more complex financial situations at the higher end.6NerdWallet. How Much Does a Financial Advisor Cost Hedge-fund-style managers sometimes add a performance fee, commonly 20% of profits above a benchmark, but this is essentially limited to high-net-worth clients.
Minimum investments differ sharply. Some robo-advisors open accounts with $0 to $500, and Vanguard Digital Advisor starts at $100.7Vanguard. Robo-Advisor – Automated Investing Services Higher-end wealth management firms often require $250,000 to $1,000,000 or more. The minimum reflects what the firm needs to justify servicing your account at its fee.
Costs the Management Fee Does Not Cover
- Custodial fees: annual account maintenance charges from the brokerage holding your assets.
- Transaction costs: per-trade fees on some accounts, though wrap accounts fold these into the management fee.
- Fund expenses: mutual funds and ETFs carry internal expense ratios that reduce your returns separately from any advisory fee.
- Loads: certain mutual funds charge a percentage when you buy in (front-end) or sell out (back-end).
An RIA must disclose these costs, its compensation, and any conflicts of interest in its Form ADV Part 2A brochure.8SEC.gov. Form ADV Part 2 Uniform Requirements for the Investment Adviser Brochure and Brochure Supplements If the advisor earns commissions on particular products, that has to be disclosed too. Read the brochure before signing. It tells you how the advisor makes money and where their incentives might diverge from yours.
Verify the Person Before You Hire Them
Checking a professional’s background takes about five minutes and is free. Do it before you send a dollar.
FINRA’s BrokerCheck at brokercheck.finra.org lets you search any broker or adviser by name, firm, or CRD number. It shows current registration status, employment history, regulatory actions, and any investor complaints or arbitration awards.9FINRA.org. BrokerCheck – Find a Broker, Investment or Financial Advisor Not finding someone there is itself a serious warning sign.
For RIAs specifically, the SEC’s Investment Adviser Public Disclosure site at adviserinfo.sec.gov shows the firm’s Form ADV filing, including business practices, fees, disciplinary history, and conflicts.10Investment Adviser Public Disclosure. IAPD – Investment Adviser Public Disclosure – Homepage Every registered firm has a Central Registration Depository (CRD) number you can use to trace it across both databases.11FINRA.org. Central Registration Depository (CRD)
The bigger financial risk is not overpaying a legitimate advisor. It is handing money to someone with no registration and no legal duty to you. The SEC keeps a public list of entities falsely claiming to be registered U.S. securities firms, including impersonators who copy the names and CRDs of real firms.12SEC.gov. Public Alert – Unregistered Soliciting Entities (PAUSE) Social media has amplified the problem. Anyone can post screenshots of profits and offer to manage your money; if they are not registered and licensed, they are operating illegally, and you have no regulator to complain to when the funds vanish. SEC guidance is plain: verify through BrokerCheck or IAPD before wiring anything.13SEC.gov. SEC Warns of Purported Financial Professionals Using False Credentials A legitimate professional will never ask you to send money to their personal account. Your assets belong with a recognized custodian, and trading authority is granted through the brokerage’s formal process.
Giving Authority Without Giving Up Your Money
Once your account is open and funded, the manager needs legal authority to place trades. That comes from a limited power of attorney (LPOA), a standard form the brokerage provides during setup.
Read which version you are signing. Limited trading authorization lets the manager place orders and see balances, but explicitly bars them from withdrawing or transferring your assets.14SEC.gov. Trading Authorization/Power of Attorney and Indemnification Form – Domestic Full trading authorization goes further, allowing disbursements and even transfers or gifts of money from your account, including to the agent. For a managed trading arrangement, limited authorization is the standard, appropriate choice. You should have a specific reason before granting full authority to anyone.
Setting up the account also requires government-issued identification and your Social Security number under federal anti-money-laundering and tax-reporting rules,15FINRA. Anti-Money Laundering (AML) plus disclosures of income, net worth, tax situation, investment experience, and risk tolerance. FINRA Rule 2111 requires professionals to use reasonable diligence to understand your investment profile before recommending a strategy.16FINRA.org. 2111. Suitability Be accurate. A manager trading based on the wrong picture of your finances can cause real damage.
Taxes Are Still Yours
Hiring someone to trade for you does not change the tax rules on your gains and losses. You are the account owner, and every sale the manager executes is a taxable event to you.
The key line is between short-term and long-term capital gains. Securities held for one year or less generate short-term gains, taxed as ordinary income at your regular rate. Held for more than a year, they qualify for lower long-term capital gains rates of 0%, 15%, or 20% depending on your taxable income.17Internal Revenue Service. Topic No. 409, Capital Gains and Losses18Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates An active manager who turns the portfolio over frequently can generate a lot of short-term gains, which quietly erodes your after-tax returns. Ask any prospective advisor how often they expect to trade and how they approach tax efficiency.
Many robo-advisors and some human advisors use tax-loss harvesting, selling losing positions to offset gains and lower your bill.19Vanguard. What Is a Robo-Advisor Watch the wash sale rule. It disallows a tax loss if you buy a substantially identical security within 30 days before or after the sale, and it applies across all your accounts, including IRAs and even your spouse’s accounts.20Office of the Law Revision Counsel. 26 US Code 1091 – Loss From Wash Sales of Stock or Securities If your managed account sells a stock at a loss and you buy the same stock in a separate self-directed account inside that window, the deduction disappears. Your brokerage only tracks wash sales within a single account, so coordination across accounts is your job.
Ending the Arrangement
If you want to leave the advisor, you can transfer the account to another firm or take over the trading yourself. Most brokerage-to-brokerage transfers move through the Automated Customer Account Transfer Service (ACATS): open the new account, fill out a transfer form, and the receiving firm handles the rest. Holdings the new firm supports move in-kind; anything it does not support is liquidated and the cash transfers. Do not place trades while the transfer is in progress.
To end the manager’s trading authority, submit a written revocation to both the advisor and the brokerage. Name the agent, state that the power of attorney is revoked, and keep copies plus any confirmation. The brokerage cuts off access once it processes the revocation. If you prepaid fees, check the refund terms. The advisor’s Form ADV Part 2A brochure has to spell out how refunds are calculated when you terminate mid-period.8SEC.gov. Form ADV Part 2 Uniform Requirements for the Investment Adviser Brochure and Brochure Supplements