A 3% advisory fee on a $1.5 million inheritance costs about $45,000 a year. Surveys show millions of heirs face this choice — a Harris poll found 43% plan to fire their parents’ advisers — so before you pull the plug compare paperwork, services, net performance and the practical costs of switching.

How big is a 3% fee in plain dollars?

On $1.5 million, a 3% annual fee equals $45,000. If the portfolio earns 6% before fees, a 3% drag cuts that to about 3% for you. Over time that difference compounds and materially changes outcomes.

Start with paperwork, not emotion

Request these items before making a decision:

  • Fee schedule and list of services provided.
  • Three years of performance figures showing returns gross and net of fees.
  • Form ADV (if the adviser is registered) to review fee models and disclosed conflicts.
  • Account statements and custodial information — who holds the assets.

Independent custody reduces conflicts and makes transitions smoother.

Measure what you’re getting for the fee

A higher fee may be defensible if the adviser provides complex, value‑adding services. Ask whether the adviser handles:

  • Tax‑loss harvesting and tax coordination with accountants.
  • Estate, trust and tax planning coordination with lawyers.
  • Management of concentrated stock positions and liquidity or gifting plans.
  • Cash‑flow modelling for retirement or charitable strategies.

If the adviser mainly recommends a mutual‑fund lineup and quarterly rebalancing, that may not justify 3%. Ask for client‑level examples showing how their work materially changed outcomes.

Ask direct questions — and document answers

  • Do you act as a fiduciary at all times? If the firm won’t say “yes” clearly, treat that as a red flag.
  • What conflicts exist — commissions, revenue‑sharing, referral fees?
  • If the adviser offers a lower fee or different services, get it in a signed engagement letter.

Compare fee models and run scenarios

Run a simple dollar comparison between the adviser’s 3% and alternatives (1% adviser, flat fee planner, DIY). Include:

  • Dollar difference in annual fees and projected compounded value over time.
  • Taxes and trading costs that affect net returns.
  • Time cost if you manage the assets yourself.
  • Transition costs: termination fees, deferred commissions, and potential capital gains on moving taxable accounts.

Consider hybrid solutions: negotiate a lower percentage, shift portions to lower‑cost index funds, or keep the adviser for estate‑specific tasks while delegating day‑to‑day investing elsewhere.

Alternatives to outright firing

  • Negotiate — firms often reduce fees for larger account sizes or offer tiered schedules.
  • Propose a trial period with a performance‑based fee or a capped fee arrangement.
  • Split responsibilities: retain the adviser for estate, tax and trust administration while moving investment management to lower‑cost providers.

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A Harris poll cited in Opher Ganel’s analysis found 43% of heirs plan to fire their parents’ advisers. Document what you have, run net-of-fees comparisons, and weigh one-time transition costs against long-term fee savings before you act.

This article was created with AI assistance.