The cost of a financial advisor depends on many factors, including the amount invested and the type of financial advisor you choose.
Here’s a breakdown of how much you can expect to pay when working with a financial advisor, and what to look for when looking for one.
What services do financial advisors offer?
traditional financial advisor
A traditional financial advisor is an individual licensed to provide investment advice. Some financial advisors are Certified Financial Planners (CFP), one of the highest levels of certification for financial planners.
Chartered Financial Analyst (CFA) and Chartered Financial Consultant (ChFC) are two other popular certifications.
A financial planner or advisor provides a variety of services, including:
- retirement plan
- tax planning
- savings for college
- real estate planning
- Budgeting and Debt Service
Many financial planners specialize in specific areas. For example, some prefer working with young families, while others help those transitioning into retirement.
A financial planner can answer most questions about money. At least I can point you to the right resources. You can also create specific plans based on your goals.
Most financial planners can also choose what to invest in, how to diversify their portfolio, and physically manage their investments. They may then take charge of those investments or give you a roadmap to follow yourself. Sometimes there are.
The best types of financial planners have fiduciary responsibilities. Fiduciary duty is the legal responsibility to recommend only the best products and investments available, rather than products and investments that may give financial planners high fees. Before choosing a financial planner, make sure they are trustworthy.
read more: best financial advisor
Instead of human recommendations, robo-advisors use algorithms to decide how to invest. When you open an account with a robo-advisor, the system asks a series of basic questions about your age, income, family composition, and desired retirement age. You should also provide a list of your current assets and liabilities.
Then use that information to decide where and how much to invest. You can set up automatic transfers from your bank account to your robo-advisor. A robo-advisor will invest that money for you.
Robo-advisors have lower fees than financial planners, so it’s easy to get started. Personal His Financials If you can’t afford the hefty fees that his planner costs, a robo-advisor might be a better fit.
Some robo-advisors may even give you access to a qualified financial planner so you can ask specific questions and get customized human answers. Note that you may need to meet certain investment thresholds to use it, and often you will need to pay a separate fee. We only offer financial planning services to those with $1 or more.
read more: best robo-advisor
How much does a financial advisor cost?
personal financial planner
Individual financial planners may charge for their services in several different ways. The most common fee types you see are:
assets under management
If you want a financial planner to personally direct your investments, you pay based on assets under management (AUM). The average charge for this service is 1% of AUM. For example, if you have a $200,000 investment portfolio, you will pay $2,000 annually.
Customers who are nervous about managing their money may prefer this AUM model. However, it may be less expensive to figure out how to handle the investment yourself. You can hire a financial planner to create an investment plan for you, but you can also learn more about moving that money yourself.
Many financial planners, especially planners with fiduciary duty, charge their clients on an hourly basis. The average hourly wage is $200-400.
If you meet with your financial planner on an hourly basis, you will be charged for the total hours. Some have a minimum hourly value (such as 2 hours) that must be reached for each session. Depending on the planner, you may receive free or limited email support after the meeting.
read more: 13 Questions to Ask When Interviewing a Financial Advisor
Some planners offer a retainer model that allows you to pay a flat fee and access a limited amount of advice and guidance. If you do not use the service, the period generally cannot be carried over to the next year.
Retainer costs from financial planners are often between $2,000 and $7,500 per year.
Clients often hire a financial planner to help develop a comprehensive financial plan that includes recommendations on where to invest and how much to save. If you have access to an employer-sponsored retirement account such as a 401(k), we may be able to assess the funds available in that plan and recommend an investment strategy.
A typical cost for a project or plan is $2,500 to $3,000. This typically does not involve implementing plan recommendations on the customer’s shoulders.
Some financial advisors get paid for buying recommended products. Advisors who work on commissions recommend investment products with loading fees ranging from 3% to 6%.
Fee-based financial advisors may seem like the cheapest option upfront, but they often don’t recommend the best products. Even if better options are available, we may suggest investments with the highest fees.
Some planners choose to charge a flat annual fee for investment management services instead of charging with AUM. For a high net worth customer, this rate may be a better deal than paying with her AUM. Still, on average, from $1,000 a year, he’ll be paying $5,000.
read more: How to get a financial advisor when your income is low
Most robo-advisors charge an annual fee as a percentage of your invested assets. Fees vary by specific robo-advisor, but usually he is between 0.15% and 0.30%.
For example, the Vanguard Digital Advisor charges only 0.20% but has a minimum investment of $3,000, which is higher than most robo-advisors. on the other hand, empower We charge 0.89% for accounts worth up to $1 million. Acorn is one of the only robo-advisors with a monthly fee regardless of investment amount.
(Personal Capital is Empowered Now)
A financial planner’s services can cost anywhere from $1,000 to $7,500 (or more) per year. Your specific fee will depend on how you want advice, how much you invest, and what type of financial planner you choose.
But if you’re used to managing your investments yourself, you may be able to save money by avoiding the fees that come with hiring a professional.