How Much Does A Financial Advisor Cost?

Regarding your finances, you want to ensure you work with the best. That’s where financial advisors come in. They can help you navigate complex investment options and help you plan for your future. But how much do they cost? And is it worth it? In this guide, we will discuss the cost of financial advisors and what you can expect to get in return.

How Much Does a Financial Advisor Cost?

Some financial advisors charge a percentage of the assets they manage for their clients, typically ranging from 0.25% to 2% per year. So, for example, if you have $100,000 in assets and your advisor charges 1%, you would pay $1,000 per year for their services.

Other financial advisors charge a fixed fee, ranging from a few hundred to several thousand dollars. This fee may be charged on a one-time or ongoing basis, depending on the services provided.

What to Know About Financial Advisor Fees and Costs

Financial advisors can provide valuable guidance on managing your money and achieving your financial goals, but it’s essential to understand how they charge for their services. Here are some key things to know about financial advisor costs and fees:

• Types of Fees: Financial advisors can charge different fees, including a percentage of the assets they manage, an hourly rate, a flat fee, or a commission on certain products they sell.
• Fee Structures: The way financial advisors charge can also vary based on their fee structure. Some use a fee-only structure, where they only charge a fee for their advice and do not receive any commissions or other compensation. Others use a fee-based structure, where they may charge a fee for their advice and receive commissions or other compensation for selling certain financial products.
• Average Costs: The cost of financial advisor services can vary widely, however the average financial advisor fee is around 1% of assets under management.
• Negotiation: In some cases, financial advisor fees may be negotiable. It’s worth discussing fees and costs with your potential advisor before engaging their services to see if there is any room for negotiation.
• Hidden Costs: It’s essential to be aware of any potential hidden costs, such as trading fees or expenses associated with the financial products your advisor recommends.
• Transparency: Your financial advisor should be transparent about their fees and costs, including any potential conflicts of interest. Be sure to ask questions and understand the full scope of their services and how they are compensated.

How Are Financial Advisor Fees Charged?

Financial advisor fees can be charged in different ways depending on the type of service they provide. However, here are some common ways financial advisor fees are charged:

• Assets under management (AUM) fee: This fee is charged as a percentage of the total amount of assets the advisor manages on behalf of the client. The fee percentage typically ranges from 0.25% to 2% or more, depending on the advisor and the portfolio size. For example, if an advisor charges a 1% AUM fee and manages a portfolio worth $500,000, the fee would be $5,000 per year.
• Hourly rate: Some financial advisors charge an hourly rate for their services. The rate can vary depending on the advisor’s experience, credentials, and the complexity of the work involved. Hourly rates may range from $100 to $500 or more.
• Flat fee: Financial advisors may also charge a flat fee for a specific service, such as creating a financial plan or reviewing an investment portfolio. Flat fees can range from a few hundred to several thousand dollars, depending on the service and the complexity of the work involved.
• Commission-based: Some financial advisors earn commissions on the financial products they sell, such as mutual funds, insurance policies, or annuities. Commission rates can vary depending on the product and the advisor’s compensation arrangement with the product provider.
• Performance-based fee: In some cases, financial advisors may charge a fee based on the performance of the client’s portfolio. This fee is typically calculated as a percentage of the investment gains and may be subject to a minimum or maximum fee.

Fee-based financial planners

Fee-based financial planners provide financial planning services and charge fees for their advice. They may also receive commissions or other compensation for selling certain financial products to their clients. Fee-based planners can offer various services, including investment management, retirement planning, tax planning, estate planning, and insurance planning.

Fee-based financial planners typically charge a percentage of assets under management (AUM) or an hourly or flat fee for their services. For example, an advisor may charge a 1% AUM fee for managing a client’s investment portfolio and a flat fee for creating a financial plan. In addition to fees, fee-based advisors may receive commissions or other compensation for selling certain financial products, such as insurance policies or mutual funds.

Traditional financial advisors

Traditional financial advisors advise individuals, families, and businesses on financial planning and investment advice. They typically work for financial advisory firms or brokerages and are compensated through fees and commissions on the products they sell.

Traditional financial advisors offer various services, including investment management, retirement planning, tax planning, estate planning, and insurance planning. In addition, they work with clients to create customized financial plans that consider their goals, risk tolerance, and time horizon.

Traditional financial advisors often charge a percentage of assets under management (AUM) for their services, ranging from 0.25% to 2% or more, depending on the advisor and the portfolio size. They may also charge fees for specific services, such as creating a financial plan or managing a 401k plan.

Financial Advisors Who Charge a Percentage of Assets Under Management (AUM)

Financial advisors who charge a percentage of assets under management (AUM) are compensated based on the total value of the assets they manage for their clients. AUM-based fees are a common way for financial advisors to charge for their services and are typically calculated as a percentage of the assets the advisor manages on behalf of the client.

For example, if an advisor charges a 1% AUM fee and manages a portfolio worth $500,000, the fee would be $5,000 per year. As the portfolio’s value grows or declines, the advisor’s fees will increase or decrease accordingly.

AUM-based fees can vary depending on the advisor and the portfolio size. They may range from 0.25% to 2% or more, with larger portfolios typically charged lower fees as a percentage of assets under management. Advisors may also charge a minimum annual or flat fee for smaller portfolios.

Flat Fee Financial Advisors

Flat fee financial advisors charge a fixed fee for their services, regardless of the portfolio size or the number of assets under management. This fee structure can benefit clients who want transparency and predictability in their financial planning costs.

The flat fee charged by financial advisors can vary depending on the level of service provided and the advisor’s experience and expertise. For example, an advisor may charge a flat fee of $2,000 for a basic financial plan or $10,000 or more for a more comprehensive wealth management plan.

Financial Advisors who Charge Subscription-Based Fees (Annual or Monthly)

Subscription-based fees are usually determined based on the level of service and the advisor’s expertise. Advisors may offer different service levels, such as essential financial planning or more comprehensive wealth management, with fees increasing as the level of service increases. Monthly fees typically range from a few hundred to over a thousand dollars, depending on the advisor and the services provided.

Annual fees are often lower than monthly but may require a larger upfront payment. Annual fees can range from a few thousand dollars to tens of thousands of dollars, depending on the advisor and the complexity of the client’s financial situation.

Financial Advisors who Charge Based on a Percentage of Your Income

While it is less common than other fee structures, some financial advisors may charge a percentage of your income as their service fee. This fee structure may be more suitable for individuals with lower levels of investable assets but a relatively high income.

The percentage of income these advisors charge can vary but generally ranges from 1% to 2% of your annual income. For example, if you earn $100,000 per year and your advisor charges a 1% fee, you would pay $1,000 per year for their services.

Next Steps

Financial advisors can be invaluable assets for your long-term financial success. They can provide expert advice and help you make sound financial decisions. The cost of hiring a financial advisor varies depending on your needed services and the time commitment. But if you ever feel overwhelmed or uncertain about your finances, it may be worth looking into getting a financial advisor to help secure your future. Furthermore, they can guide you through investing and ensure you make smart investments with your money. So take the right step now – request a free quote to start building a better financial future.

Request A Quote

Get help from a licensed financial professional. This service is free of charge.

Frequently Asked Questions