Natalia
High fees can quietly erode your investment returns over time. Whether through mutual funds, financial advisors, or annuity products, cost structures such as expense ratios, advisory/AUM fees, or annuity rider charges warrant close attention.
Here’s what’s trending in 2025 fees—and how you can actively request a fee audit to protect your portfolio.
Expense Ratios: How Much Are You Really Paying?
- Equity mutual funds now average around 0.40% per year on an asset-weighted basis—a significant drop from about 1.10% in 2000, though unweighted averages remain higher.
- Index stock ETFs and passive funds boast substantially lower costs, with averages around 0.14%. Some offer ultra-low rates down to 0.05%.
- Bond mutual funds come in lower still, averaging roughly 0.38%, while money market funds hover near 0.22%.
- Ultra-low-cost options like Vanguard’s own funds average just 0.07%.
Why it matters: Over decades, even small percentage differences compound into thousands in lost gains.
Advisory & AUM Fees: What You Pay for Guidance
- AUM (Assets Under Management) fees typically range from 0.5% to 1.5% annually, with the average sitting at 1.05%.
- Flat or retainer-based models may charge a one-time fee between $2,000 and $7,500, or an annual retainer averaging $4,484.
- Other advisors charge 0.65% to 1.65% AUM, or hourly rates of $120–$300, or flat planning fees of $1,000–$3,000.
- Those including holistic financial planning often allocate a higher share of fees toward actual advice versus just investment management.
Annuity Rider Fees: Optional Adds That Add Up
- Administrative fees for annuities usually run around 0.3% annually.
- Mortality & expense charges—covering death benefits and longevity risk—typically range from 0.5% to 1.5%.
- Investment component fees (especially in variable or indexed annuities) may range from 0.06% up to 3%, depending on the product.
- Optional riders—like lifetime income, death benefit, inflation protection, or long-term care—cost between 0.25% and 1.5% annually each.
- Sales loads or upfront commissions can deduct 1%–8% from your initial investment, directly reducing principal.
Note: Some variable annuities carry total annual costs (stacking all fees) in the 2%–4% range, making them among the most expensive vehicles
Summary Table: Fee Comparison at a Glance
| Fee Type | Typical Range | Why It Matters |
|---|---|---|
| Expense Ratios (Equity) | ~0.40% (asset-weighted); ~1.10% unweighted | High cost eats into long-term returns |
| Index ETF/Passive Funds | ~0.05%–0.14% | Low cost preserves compound growth |
| AUM Advisory Fees | 0.5%–1.5% (avg ~1.05%) | Annual drag on returns; hidden impact |
| Flat/Hourly Planning Fees | $1k–$7.5k or hourly $120–$300 | Transparent but can be costlier for small portfolios |
| Annuity Administrative | ~0.3% | Adds up year after year |
| Mortality & Expense | 0.5%–1.5% | Reduces growth, especially in variable annuities |
| Rider Fees | 0.25%–1.5% per rider | Additional drag for optional protections |
| Upfront Commissions | 1%–8% of premium | Reduces initial invested capital |
| Variable Annuity Total | 2%–4% | Among costliest, requires scrutiny |
How to Ask for a Fee Audit
- Request a fee breakdown from your advisor or provider—ask for itemized percentages and flat charges.
- Compare against benchmarks: e.g., 0.05%–0.15% index funds; 0.5%–1% AUM fees; low or no-sticker annuities.
- Ask explicitly for a “fee audit”—a review of your investment costs. Frame it as a fiduciary check to ensure you’re not overpaying.
- Negotiate fees—many advisors will lower AUM rates for high balances or shift to flat-rate pricing.
- Consider low-cost alternatives—index ETFs, direct-plan advisors, or no-rider annuities as options.
Fees—whether from fund expense ratios, advisory/AUM charges, or annuity riders—are often hidden but can seriously erode retirement outcomes.
As of 2025, index funds and ETFs offer ultra-low rates (~0.05%–0.14%), while AUM fees still average ~1%, and annuities may tack on even more.
A proactive fee audit empowers you to spot costly structures, negotiate better terms, and preserve compound growth. Your future self—and portfolio—will thank you.
FAQs
Generally, an expense ratio below 0.20% is considered excellent for equity index funds; passives often deliver best value.
Yes. Many advisors will negotiate to waive flat fees or reduce AUM percentages if your balance is substantial.
Not always. Riders can cost up to 1.5% annually and may leave less for you or heirs. Evaluate whether the benefit outweighs the fee drag.