Should I choose a fee-only vs. commission advisor for $800K?

Step 1: What would $800K cost me over ten years with each pay model?

On these assumptions, a fee-only advisor costs $88,000 over ten years and a commission advisor costs $97,000, making the commission choice about $9K higher before investment growth. That comparison is useful only when you add the advisory charge, fund expense ratio, and sales load to the same $800K balance, then ask what advice continues after the sale.

For illustration, Pavel is a hypothetical 71-year-old divorced retired pharmacist with two adult children. Nearly all of his savings sit in a $2.1M traditional IRA, and he moves $800K to a new advisor before required minimum distributions begin at 73. Pavel A and Pavel B make the same move, hold balances flat for comparison, and receive different offers. Only the pay model changes.

Pavel A pays a 1 percent annual fee: $800K × 0.01 = $8,000. His index funds cost 0.10 percent: $800K × 0.001 = $800. Together, that is $8,800 annually. Over ten years, $8,800 × 10 = $88,000.

Pavel B pays a 5 percent load at purchase: $800K × 0.05 = $40,000. That leaves $760K invested. His funds cost 0.75 percent annually: $760K × 0.0075 = $5,700. Ten years of fund costs equal $57,000, so $40,000 + $57,000 = $97,000. Pavel B pays about $9,000 more, before growth.

The conflicts are different. A percentage fee falls when money leaves the account, so the advisor has a financial reason to resist a large withdrawal, debt payoff, or annuity purchase. A commission arrives when a product is sold, creating pressure toward purchases and switches. Neither fact tells you what a particular person will recommend. It tells you what you need to inspect.

Before changing advisors, Pavel held $800K in 0.75 percent funds and paid $6,000 annually with no ongoing advice. Under Offer A, he pays $8,800 annually. The extra $2,800 buys help with Roth conversions and the RMDs that start at 73. At Tolleson Wealth Management, that sort of comparison also has to fit the withdrawals you expect to take, because a retirement paycheck should be able to rise or trim back when markets do.

“When will this cost show up?” is the question behind this timeline. It shows the points when Pavel can see the load, compare the ongoing charges, and decide whether the advice is still worth the total he is paying.

Step 2: Pull every statement and each fund’s expense ratio

Start with the latest IRA statement and the prospectus page that lists each fund’s expense ratio. Fund expenses leave the fund’s assets, so they will not arrive as a separate bill. A 1 percent advisory charge paired with 0.10 percent funds costs $8,800 annually on $800K; the same charge with 0.90 percent funds costs $15,200. Tolleson Wealth Management asks to see those figures before discussing a change in investments.

Step 3: Read Form CRS and the ADV Part 2A brochure

Form CRS and Form ADV Part 2A show how an advisor or brokerage firm is paid, what services are offered, and where conflicts may arise; read both before you transfer an IRA. The SEC requires registered investment advisers and broker-dealers to give retail clients Form CRS, and its Investment Adviser Public Disclosure site provides an adviser’s ADV Part 2A brochure.

Ask for Form CRS directly, then find the brochure through the SEC’s public database. Look for advisory fees, transaction-based compensation, revenue sharing, fund-company payments, and outside business activities. The language can be dry. Circle anything that says a recommendation could change someone’s compensation.

Registered investment advisers owe a fiduciary duty under the Investment Advisers Act of 1940. Broker-dealers follow Regulation Best Interest. The slip occurs when a retiree assumes one person always works under one standard, even though some professionals operate in both roles. Tolleson Wealth Management encourages readers to ask which role the professional is acting in for the specific recommendation on the table.

Step 4: Multiply ten years of charges on your own balance

Add every cost layer, multiply by ten years on your own balance, and compare those totals, never the headline rate alone. This quick test will not predict returns or taxes, but it makes an offer’s price visible before you sign account paperwork.

For the fee model, multiply balance by the advisory fee plus the fund expense ratio, then multiply by ten. Pavel’s calculation is $800K × 1.10 percent = $8,800 annually; $8,800 × 10 = $88,000. For the commission model, take the load first, then add ten years of fund expenses on what remains: $40,000 + ($760K × 0.75 percent × 10 = $57,000) = $97,000.

The ten-year math holds balances flat and leaves out investment growth. Many load funds reduce the sales charge at larger purchase amounts through breakpoints, so an $800K purchase may pay well under 5 percent. Read the prospectus before treating the $9K difference as fixed.

Time is what makes a small rate gap large. Pavel is 71, so ten years is his realistic horizon, but a younger retiree may hold the account for 20. Assuming 5 percent a year, for illustration, $800K grows to about $2.12M over 20 years. At 4.5 percent, it grows to about $1.93M. That 0.5 percent annual gap produces a difference near $193K. Accounts can also fall below what you originally invested, so treat these figures as arithmetic, not a forecast.

Tolleson Wealth Management puts this cost work beside the withdrawal plan. Once Pavel draws a paycheck from the IRA, a 1 percent fee comes out of the same balance his guardrails watch, so in a down year when spending is trimmed, the fee is one more line he should see in dollars.

Step 5: Match the pay model to your balance and next ten years

A percentage fee-only advisor, a commission advisor, and a flat or hourly fee-only advisor suit different amounts of ongoing work, but every choice should be priced over the years you expect to use it. A commission arrangement can cost less for a person who buys once, receives no ongoing advice, and has confirmed the load and fund charges are low.

A percentage fee gives you a charge that changes with account value and may include continuing help with investments and retirement withdrawals. A commission structure may charge at the purchase, then leave you with fund expenses and possible deferred sales charges. A flat or hourly arrangement separates the advice bill from assets under management, which can be appealing when you want a rollover decision and a spending playbook but not ongoing investment management.

Household circumstances change the math. A single retiree may need fewer paid hours than a married couple coordinating two account sets, survivor income, and beneficiaries. On $300K, 1 percent is $3,000 annually, and a flat fee may cost less. On $2.1M, 1 percent is $21,000 annually, so ask whether breakpoints reduce the rate at higher balances.

Someone retiring at 60 has more years for fees to compound than someone beginning withdrawals at 75. As retirement draws close, compare the cost with the work ahead: a 401(k) rollover to an IRA, Social Security claiming, Roth conversion strategy, Medicare IRMAA planning, and future RMDs. Ask each firm for a written explanation of every way it is paid before assets are transferred.

Step 6: Four pay questions before the IRA transfer

Put the same four questions to the advisor, your CPA, and the IRA custodian, then keep their answers with the rollover paperwork. A verbal answer is hard to compare later, especially when a fund prospectus, custodian record, and advisory agreement use different labels for the same charge.

• Ask the advisor: “Will you put in writing every way you’re paid on my account, including commissions, revenue sharing and fund fees?”
• Ask the advisor: “Does your pay change if I take a large withdrawal, buy an annuity or convert to a Roth?”
• Ask the CPA: “Which of these costs come out of the IRA, and how does that affect my taxable income this year?”
• Ask the IRA custodian: “Is there a deferred sales charge if these shares are sold within a set number of years?”

Step 7: A $760K first statement is where the load shows up

Signing an account form without reading Form CRS becomes real when Pavel B opens his first statement and sees $760K invested, not $800K. The $40K load came off the top at purchase, and it is not returned merely because he changes advisors. That is a costly discovery when RMDs are only two years away.

The first thing to check is whether a deferred sales charge also applies if the fund is sold soon after purchase. The custodian can confirm it. Pavel should compare that charge with the cost of staying, the fund’s ongoing expense ratio, and the advice he is receiving. A switch is not automatically worth it, but neither is ignoring a charge already paid.

Pavel’s $2.1M IRA means future withdrawals may be substantial. Under current IRS rules, RMDs generally start at 73, though people born in 1960 or later generally begin at 75. Selling investments to meet required withdrawals can make an expensive, illiquid holding harder to live with.

Step 8: The pay question for Tolleson Wealth Management and a rollover-sized IRA

Bring your IRA statement to Tolleson Wealth Management and ask for the ten-year cost of its approach, including fund expenses, set out with the Step 4 arithmetic. Then place that number beside the other offers line by line. A workable answer should also show how the ongoing cost fits a flexible withdrawal approach as markets and spending needs change.