How Much Does a Financial Advisor Cost?

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The cost of working with a financial advisor varies depending on the services you need. Certified financial planners or investment advisors charge fees for a variety of services including asset management, managed accounts, portfolio management, CFP, retirement planning funds or wealth management fees.

Here are sample fees you might encounter, according to averages cited by AdvisoryHQ.

Financial Advisor Fees: Average Costs Based on Investment Amounts

What Affects the Cost of a Financial Advisor?

The cost of a financial advisor can depend on several factors, including the type of advisor and the fee structure they use.

Traditional financial advisors often offer a range of fee models, from assets under management to flat or hourly rates, while robo-advisors and hybrid models tend to have simpler, lower-cost fee structures. Here’s a breakdown of the various fee options and how they might affect financial advisor costs.

1. Percentage of Assets Under Management

The percentage of assets under management (AUM) fees makes up the most common fee structure today. Under AUM, financial advisors charge clients an annual percentage of the assets being managed. The smaller the number of your assets, the higher the fees. Expect to pay somewhere between 0.50% and 2%.

For example, a client with a $100,000 investment might incur an average AUM fee of 1.12% or $1,120 per year, according to AdvisoryHQ, whereas the average annual fee for a client with a $2 million investment would be 0.91% percent or $18,200. Fees can range from $590 to $177,000 per year, depending on the amount of AUM. 

Other services

Asset management also includes record keeping, accounting services, trading, due diligence, financial planning, investment advice, tax management, portfolio rebalancing and monitoring.

2. Annual Retainer

The annual retainer fee is partially based on your AUM and the complexity of your finances. The advantage of paying an annual retainer is having access to the financial services you need when you need them. This fee structure is well suited for people who are looking to build a long-term relationship with their financial advisor with the goal of increasing their wealth over time.

According to AdvisoryHQ, you can expect to pay anywhere from $6,000 to $10,000 annually for a retainer; the actual financial advisor cost will depend on the financial advisor you choose and their location, as well as your specific needs.

3. Fixed or Flat Rate

The fixed or flat rate fee is also based on AUM. You advisor will create a fee structure based on a fixed-fee bracket. The fixed/flat rate fee structure may be more or less expensive than a fee based on the percentage of assets based on management, so make sure to compare the two.

You can expect to pay an average flat rate of $2,000 to $4,000 for a single financial session, according to Barron’s, plus $200 to $400 per hour for additional service. An annual fee of $7,500 to $55,000 could apply for fixed/flat-rate services. The average fixed/flat fee for AUM of up to $499,999 is $7,500, AdvisoryHQ noted.

4. Hourly Rate

Hiring a financial advisor with an hourly rate makes sense when you need a one-time service, such as a review of your 401(k) or assistance with estate planning.

Average hourly fees for a financial advisor range from $200 to over $500 per hour. If you need ongoing services, however, finding a financial advisor who charges a fixed/flat rate or percentage fee structure would be more cost-effective.

5. Package Fee

Some financial advisors offer package fees to clients for advice on specific topics, such as retirement, taxes, college and assets. There is no data available on an average package fee; the actual fee will depend on the specific financial advisor offering the service.

Depending on what you need help with, a package fee may be more affordable than an hourly rate for the same services.

Robo-Advisor

A robo-advisor is a virtual platform that uses computer software to manage money and investments. Robo-advisors work by collecting information from the client and using an algorithm to match the client with products. 

These automated services cost less than human financial advisors and may be worth the savings if you don’t need customized service and unlimited access to your advisor. You can expect to pay 0.25% to 0.50% of your account balance in robo-advisor fees each year.

Hybrid Robo-Advisor

Another type of financial advising is the hybrid robo-advisor model. With this service, you’ll have access to a virtual robo-advisor platform and a real-life financial advisor. 

Meetings with the human financial advisor often take place by phone or video conferencing, which is typically less costly than meeting in person with a traditional financial advisor. Fees will depend on the particular firm you use and can be based on AUM or a flat monthly fee.

Are Financial Advisor Fees Worth the Cost?

Determining whether a financial advisor is worth the cost is a personal decision that depends on your financial goals and needs. Yes, you have to pay for their services, but you’re paying for their expertise and understanding of the financial industry.

They have the ability to objectively review your financial plans and offer advice that can potentially save you money and build wealth over your lifetime. Ultimately, the cost of a financial advisor should align with your needs and the value they bring to your financial strategy.

Caitlyn Moorhead and Daria Uhlig contributed to the reporting of this article.

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