A typical financial advisor cost can be anywhere from $100 to 300 if you hire them by the hour. If they oversee your “assets under management,” a typical fee structure can be anywhere from 1% to 2% of your account balance.
If you’re serious about building wealth or need help developing a plan to reach your financial goals, you will have to work with a financial advisor at some point in your life.
However, hiring a financial advisor costs money; it’s not for free. Luckily, you may have some options even if you don’t have that much money.
Financial advisor costs vary depending on the advisor and the kind of advice you’re seeking. This article will explain some of the average fees that a financial advisor charges their client and your payment options. If you’re just starting out, a financial advisor who charges hourly might be the best fit for you.
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What is a financial advisor?
Before we delve into how much a financial advisor charges for their services, you need to know what exactly a financial advisor does.
A financial advisor, simply stated, is a licensed professional who provides financial advice in a wide range of financial subjects. Those subjects include budgeting, investing, estate planning, retirement, risk management, taxation, etc.
Check the Investment Adviser Public disclosure website to check if that person is authorized and licensed to give you the kind of advice you’re seeking.
Indeed, a financial advisor can help you take control of your money, get rid of your debt, save money, and build wealth. They can help you develop an investment plan, or help you plan for retirement, etc…
Moreover, financial advice is important where you’ve reached a turning point in your life like getting married, starting a family, or buying a house.
Beyond knowing how much a financial advisor will cost you, it’s also important to find out whether they have worked with clients in similar position to yours.
How Much A Financial Advisor Costs?
Now that you know how a financial advisor can help you with your finances, here are some of the typical fees you might expect them to charge you should you decide to hire one in the future.
Typically, financial advisors charge you in three ways: commission-based, fee-based and fee-only.
Typical financial advisor fees
Commission-based financial advisors receive a commission when they sell you financial products such as mutual funds, annuities, and insurance. Fee-based advisors not only provide financial advice for a fee, but they also get paid a commission on the financial products they sell you.
Fee-only advisors. As for the “fee-only” advisors, they only charge you for their services hourly, like how lawyers do. Or they might charge you a flat rate, or a percentage of the assets they manage for you.
Out of the 3, “fee-only” advisors are strongly recommended.
Fee-only Financial Advisor Costs
|Percentage of Assets under management (AUM)||1% – 2% per year|
|Hourly fees||$100 – $300 per hour|
|Fixed rate||$1000 – $3000|
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Flat fee — If you’re looking for a comprehensive plan, most financial advisors will charge you a flat rate. A typical cost can be anywhere between $1000 to $3000.
Fixed fee per hour — If you’re meeting the advisor multiple times to create a financial plan, most advisors will typically cost you anywhere between $100 to $300 an hour.
Percentage-based fee — Financial advisors might manage your investment. If so, they will typically charge a fee equal to a percentage of your assets, usually between 1% to 2% of your investment portfolio.
The Asset Under Management, aka AUM, is a common fee structure today. So if you have $250,000 to invest and an advisor charges 1% to manage your invesment for you, expect a $2500 AUM fee per year.
Always negotiate the fees
Note that these are just the standard or average fees; you and your financial advisor can always work something out.
When you first meet with your financial advisors, sometimes they will explain their fees, the service they offer, etc.
Sometimes, however, financial advisors won’t tell you that their fees are flexible. You can and should negotiate their fees.
But whatever agreement the two of you have reached, your advisor should always outline what will be included in the fees.
In conclusion, seeking professional advice can really make a difference in your financial life. However, hiring a financial advice isn’t free. But the cost is well worth it if you want to create a comprehensive plan to build wealth.
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