Financial advisors don’t follow the same payment structure, so it can be difficult to pinpoint how much a financial advisor will cost. It all depends on the fee structure they use to conduct their business. Some financial advisors operate on a flat-fee structure that can cost a few thousand per year. Others use a percentage-based design to charge a percentage of their client’s overall account balance.
For advisors who use the percentage-based structure, those percentages typically range anywhere from 0.25% to 1% annually, depending on the client’s account balance size. So how much does a financial advisor cost? Here’s everything you need to know about how financial advisors structure their fees.
Fees for Financial Advisor Services
In most cases, advisors charge based on how much money they manage for you. This payment structure is known as AUM, or “asset under management.” Other financial advisors charge flat fees, which could be per year, hour, or service. Here are some standard cost ranges per fee type:
- AUM is usually 0.25%–0.50% annually for financial apps and robo-advisors, while in-person financial advisors typically charge 1% of your portfolio
- Annual retainer fees may vary from $2,000 to $7,000
- Hourly fees can range from $200 to $400
- Per-plan fees vary from $1,000 to $3,000
Before working with a financial advisor, it’s wise to ask about their fee structure to understand better how much you’ll be spending on their services.
Breaking Down Financial Advisor Fees
Things can quickly get confusing with so many different financial advisors and fee plans. So let’s break down a few notable types of financial advisors and how they work.
The term “robo-advisor” refers to a computer-based service that helps you choose and manage investments. These options are great for individuals who are just getting started, only need investment management help, and don’t have a lot of disposable income to allocate toward financial services. These “advisors” typically operate on an AUM fee between 0.25% and 0.50%. If you have a $10,000 account balance, you’ll pay $25 and $50 per year, respectively.
However, you get what you pay for with this system, as the portfolios are built and managed by computer algorithms that don’t offer customized planning or nuanced financial guidance.
Traditional Financial Advisors
Traditional financial advisors—actual human beings, in other words—are the best source of both investment management tactics and financial guidance. Financial advisors offer a variety of services to their clients, including:
- Retirement planning
- Estate planning
- Budgeting help
- Investment management
- Insurance advice
Financial advisors operate on varying fee structures. A few common examples include:
Financial advisors who follow the AUM fee usually charge 1% of your portfolio. Be careful with this system, as some advisors only offer investment management through the AUM fee, not financial planning or any other services. Ask AUM-based advisors up front what services are included in this fee.
Retainers can be monthly or annual. The charges vary based on your situation, services needed, and relationship with the advisor. On average, retainer fees can range from $2,000 to $7,500 a year—sometimes more, sometimes less. You typically receive comprehensive financial planning and investment management services with retainer-based advisors. These advisors create financial plans, help you implement them, and monitor your progress.
Hourly rates are another relatively budget-friendly option to access a financial advisor’s expertise on various subjects. Again, this is a “pay as you go” model where you only pay for the time needed. You can meet with your advisor occasionally to discuss changes in income, check in on your retirement savings, or create a complete financial plan.
Some advisors operate on a fee-per-plan model, creating a plan for you based on your situation and charging accordingly. With this option, you don’t get continued management and oversight; instead, you carry out the plan independently.
Finding the Right Financial Advisor
So, how much does a financial advisor cost? We hope this blog helped answer that question! As you can see, the right financial advisor and fee structure for your situation will vary depending on the services you need, your required oversight, and your budget.
To start your journey with a financial advisor, contact our knowledgeable team at Good Life Financial Advisors of Mt. Pleasant. You can schedule a no-obligation discovery call to learn more about our services, how we structure our fees, and how we can help you manage and grow your finances.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.