Can You Hire Someone to Manage Your Money: Types, Fees, and Vetting

You can hire someone to manage your money, and it’s a common, well-regulated arrangement in the United States. Most human advisors charge around 1% of your portfolio’s value each year, with fees running from about 0.25% for automated services up to 2% or more for hands-on wealth management. The harder questions are which type of professional fits your situation, what you’ll actually pay once hidden costs are added in, and what legal duties the person you hire owes you.

Three Types of Professionals You Can Hire

The Investment Advisers Act of 1940 defines an “investment adviser” as anyone who gets paid to advise others about buying, selling, or valuing securities as a regular business.¹ In practice, you’ll be choosing among three categories.

Registered Investment Advisers (RIAs) are firms that provide ongoing portfolio management and personalized advice. Firms managing more than $100 million in client assets register with the SEC; smaller firms register with their state securities regulator. RIAs typically charge an annual percentage of the assets they manage and provide continuous oversight of your investments.

Broker-dealers act as intermediaries who buy and sell securities on your behalf, often earning commissions on individual transactions rather than a flat management fee. The relationship is generally transactional rather than advisory, which can suit people who make their own investment decisions and just need someone to execute trades.

Robo-advisors use algorithms to build and rebalance a portfolio based on your goals and risk tolerance. They’re the cheapest option, often charging 0.25% to 0.50% of assets per year, and they work well for simpler situations that don’t need a human relationship manager.

What Each Type Legally Owes You

Not every financial professional owes you the same duty of loyalty, and the difference affects the advice you’ll get.

RIAs are fiduciaries. The Investment Advisers Act requires them to act in your best interest at all times, disclose all conflicts of interest, and exercise both a duty of loyalty and a duty of care.² In practical terms, an RIA cannot steer you toward an investment because it pays the firm a higher commission.

Broker-dealers operate under a different standard called Regulation Best Interest. Reg BI requires brokers to put your interests ahead of their own financial gain when making a recommendation, which is stricter than the old “suitability” standard that only required a recommendation to fit your general financial profile.³ The distinction is real: a fiduciary must act in your best interest continuously, while Reg BI applies at the moment of each recommendation.

When a financial professional violates these duties, the SEC can bring enforcement actions carrying monetary penalties, suspension or revocation of licenses, and industry bars. Fraud can trigger federal criminal charges.

What You’ll Actually Pay

The most common arrangement is an annual fee calculated as a percentage of assets under management. That fee ranges from about 0.25% to 2% per year, with the median among human advisors running about 1%.⁴ On a $500,000 portfolio at 1%, that’s $5,000 a year, typically deducted from your account quarterly. Larger portfolios often negotiate lower rates; smaller accounts tend to pay toward the higher end.

Some planners charge hourly rates, typically $200 to $400 per hour, for targeted work like reviewing your retirement readiness or evaluating a specific investment decision.⁴ Flat project fees are another option for one-time work like a comprehensive financial plan, which typically runs around $3,000 and more for complex situations.

Commission-based models involve the advisor receiving payment from the sale of specific financial products such as mutual funds or insurance policies. The cost to you is built into the product rather than billed separately, which makes it harder to see what you’re paying.

Hidden Costs to Ask About

The headline management fee is only part of the picture. Many advisors receive 12b-1 fees, which are ongoing payments from mutual fund companies for recommending their funds. When a share class that pays 12b-1 fees is available alongside an identical share class that doesn’t, the advisor has an incentive to put you in the more expensive one. The SEC requires advisors to disclose this conflict and explain how they address it, including whether different share classes exist and how the fee differences affect your returns over time.⁵

Revenue-sharing is another one to watch. Some custodians or clearing brokers pay advisors for directing client assets their way. Advisors must disclose these arrangements in their Form ADV under Item 14.A, including payments received for recommending no-transaction-fee fund share classes or a particular custodian.⁵

Every registered advisor must disclose fees with enough specificity that you can understand the costs and verify what you’re being charged.² The complete schedule lives in the firm’s Form ADV Part 2A brochure, which must describe how and when fees are calculated, the range of fees, and whether they’re negotiable.⁶ Read it before signing anything.

Check the Person Before You Hire Them

Fifteen minutes of background checking can save you serious problems later.

FINRA’s BrokerCheck is a free tool that lets you look up any broker or investment adviser representative. A BrokerCheck report for anyone currently registered or registered within the past ten years includes employment history, customer disputes, disciplinary events, and certain criminal and financial disclosures.⁷

For RIA firms, the SEC’s Investment Adviser Public Disclosure (IAPD) site lets you search by firm name or CRD number and pull the firm’s Form ADV, which contains disclosures about disciplinary events involving the firm and its key personnel.⁸ It’s the same document the firm is legally required to hand you, so checking in advance tells you whether they’re being upfront before you walk in the door.

RIA firms must disclose material legal and disciplinary events in their Form ADV Part 2A brochure. Certain categories of events are presumed material and must be disclosed for ten years after the final order or judgment, and older events serious enough to still be relevant must be disclosed regardless of age. When new disciplinary information appears after you’ve become a client, the firm must deliver an interim amendment.⁹

What Getting Started Looks Like

A new advisor needs a complete picture of your finances. Gather recent statements from checking and savings accounts, brokerage accounts, and any employer-sponsored retirement plans. Bring the last two or three years of tax returns so the advisor can see your income levels, tax bracket, and potential liabilities. Have details on outstanding debts ready too, because your total net worth (not just investable assets) shapes the right approach.

Come with specific goals. A target retirement age, a college savings timeline, or a down-payment number gives the manager something concrete to build toward. Vague goals produce generic strategies.

Expect a risk-tolerance questionnaire that measures how much market volatility you can absorb without panic-selling. Answer honestly. Overestimating your comfort with risk is one of the fastest ways to blow up a management relationship when markets drop.

After the initial consultation, the manager presents a proposed investment policy statement with the recommended strategy, asset allocation, and benchmarks. If you agree, you sign an Investment Advisory Agreement, the contract that defines the manager’s authority over your accounts, the fee schedule, and each party’s responsibilities. Federal law requires this contract to prevent the advisor from assigning it to someone else without your consent.¹⁰

Existing investments usually move to the new manager’s custodian through the Automated Customer Account Transfer Service (ACATS), which moves securities between brokerage firms without requiring you to sell everything first.¹¹ The old firm must validate or reject the transfer request within three business days, and the whole process usually wraps up within about a week. Expect an outgoing transfer fee from your old brokerage; $75 is common, though it varies.

The Tax Bill People Don’t See Coming

When a new manager sells existing holdings in a taxable account to realign your portfolio, every sale of a security that has gained value triggers a capital gains tax. Long-term gains (assets held over a year) get preferential rates; short-term gains are taxed as ordinary income. If your old portfolio was heavily concentrated and the new manager does a significant overhaul, the one-time tax hit can be substantial.

A good manager phases in changes rather than liquidating everything on day one, especially in taxable accounts. Ask about the transition plan before you sign. Some firms will run a tax transition analysis showing the estimated capital gains impact before making any trades.

Watch the wash sale rule during transitions. If a security is sold at a loss and a substantially identical security is purchased within 30 days before or after, you can’t claim that loss on the current year’s taxes. The disallowed loss shifts to the cost basis of the replacement security, which defers the benefit rather than eliminating it, but it still disrupts your tax planning.¹² Retirement accounts like 401(k)s and IRAs don’t trigger capital gains when securities are sold inside the account, so rebalancing there is straightforward.

Where Your Money Actually Sits

Your money doesn’t sit in a pile in the manager’s office. Federal rules require registered investment advisers to keep client assets with a qualified custodian, meaning a bank, registered broker-dealer, or futures commission merchant. The custodian must hold your funds and securities either in a separate account under your name or in an account containing only client assets under the adviser’s name as agent or trustee.¹³ If the advisory firm goes bankrupt, your assets belong to you, not to the firm’s creditors.

If the custodian itself fails, the Securities Investor Protection Corporation (SIPC) steps in to recover missing customer property. SIPC coverage protects up to $500,000 per customer in total, with a $250,000 sublimit on cash claims. The $250,000 cash limit was reviewed in early 2026 and will stay unchanged through at least the end of 2031.¹⁴ SIPC does not protect you against investment losses. It protects against missing assets when a brokerage firm fails.

Ending the Relationship

You can terminate an investment advisory agreement at any time. Most contracts specify a notice period, and if you’ve prepaid management fees, you’re entitled to a pro-rata refund for the unused portion. Review the termination terms in your Investment Advisory Agreement before signing so there are no surprises later.

When you leave, you’ll either transfer assets to a new manager through ACATS or move securities to a self-directed brokerage account. The outgoing firm may charge a transfer fee. Ask the receiving firm whether they’ll reimburse that cost. Many do as a way to win your business.

Keep records of your cost basis for every security that transfers. ACATS moves positions without liquidating them, but cost-basis information doesn’t always transfer cleanly between custodians, and incorrect basis data can lead to overpaying taxes when you eventually sell.

1
Office of the Law Revision Counsel. 15 USC 80b-2 – Definitions
2
U.S. Securities and Exchange Commission. Division of Examinations Observations: Investment Advisers Fee Calculations
3
Legal Information Institute. Regulation Best Interest (Reg BI)
4
NerdWallet. How Much Does a Financial Advisor Cost?
5
U.S. Securities and Exchange Commission. Frequently Asked Questions Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Compensation
6
North American Securities Administrators Association. Compliance Matters: Clear and Reasonable Disclosure of Fees
7
FINRA.org. About BrokerCheck
8
Investment Adviser Public Disclosure. IAPD – Investment Adviser Public Disclosure – Homepage
9
SEC.gov. Form ADV Part 2: Uniform Requirements for the Investment Adviser Brochure and Brochure Supplements
10
Office of the Law Revision Counsel. 15 USC 80b-5 – Investment Advisory Contracts
11
FINRA. Customer Account Transfers
12
Charles Schwab. Primer on Wash Sales: How It Works and What to Know
13
eCFR. 17 CFR 275.206(4)-2 – Custody of Funds or Securities of Clients by Investment Advisers
14
Federal Register. Securities Investor Protection Corporation; Notice of Inflation Adjustment Determination