What ‘s the Average Cost of a Financial Advisor?

A financial advisor’s rate structure determines how much they charge. You can find financial counselors that charge by the hour or who will prepare a comprehensive plan for you to follow for a flat rate.

An AUM fee, which is a proportion of assets under management, is a common fee structure used by financial advisors. While most services charge 1% annually, you can find many that charge much less.

The amount of your assets that will determine the cost of an advisor’s AUM charge is:An annual fee of $50 would be paid by a client investing $10,000 with an advisor that charges a 0.50% fee, but a person investing $100,000 would pay $500.

What Is the Average Cost of a Financial Advisor?

H: Commissions paid to financial advisers

Below is a summary of the most common charge ranges for financial advisors. Remember that adviser costs might differ greatly based on factors including the amount of service you receive, where you live, and other variables.

These were the average fees paid by financial advisors last year, according to the 2024 State of Financial Planning and Fees research by Envestnet, a business that produces software for the asset management industry:

• A human advisor will cost you 1.05% of the total.
• A retainer of $4,484 per year.
• Rate per hour: $268.
• The cost per plan is $2,554.
• The subscription charge is $215 per month [2].

The average expenses, according to the 2024 Kitces.com study, were

• One percent on accounts up to one million dollars is the fixed proportion for a human advisor.
• A retainer fee of $4,500 each year.
• $300 per hour.
• The cost is $3,000 per plan.

Charges for financial advisor services

There is a wide variety of financial advice available. What you pay for may vary depending on the service you select.

A robo-advisor could be the most cost-effective option for you if you’re looking for specialized investment management services. You can choose and manage your assets with the help of robo-advisors, which are computer-based services. They will construct and oversee an investing strategy tailored to your objectives, timeline, and comfort level with risk. Robo-advisors make it easier for new investors to get their feet wet because they typically have minimal or no account minimum requirements.

• Price: On a $50,000 account, a robo-advisor would charge $125 to $250 per year in fees, which is based on an AUM cost of 0.25% to 0.50%.

For that price, you get to have your portfolio constructed and tracked by algorithms run by computers. While most robo-advisors don’t really help clients with their financial planning or offer individualized investing advice, many do have planning tools and calculators available online.

Every financial advisor has their own unique rate and charge structure. How much service you’re searching for is usually a factor. As an example of what is normally included for that price, below are a few of the most popular ones.

AUM cost

Robotic investment advisers employ the same AUM model. There are often minimum balance requirements for accounts that accomplish this. Financial advisors often require a minimum account balance of $250,000 because they believe the earnings from smaller accounts are not worthwhile. There are still a plethora of choices with account minimums that are lower or nonexistent.

How much: Human advisors charge a median annual percentage of managed assets (AUM) of around 1%, with some charging as little as 0.30 percent. As investment balances rise, it is usual to observe a decrease in AUM fees.

What this price gets you: A team of advisers or an individual advisor will usually be your point of contact during your time with them.

Service retention

A price that stays the same every month or year. In most cases, the price is independent of your available investment capital, while more complicated situations may result in higher costs.

• Roughly $2,500 to $9,200 per annum.
• What is included in the price:Usually, careful preparation and oversight of financial assets:Your financial advisor will work with you to develop a strategy, then watch your progress and make adjustments as necessary.

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Salary per hour

There are financial planners who charge a flat rate regardless of the amount of assets you have. Only pay for the time you actually use.

$200 to $400 per hour is the going rate.

What this price gets you: A few meetings can help you get a handle on your finances, whether you’re saving for retirement, paying for college, or creating a budget. Another option is to acquire a comprehensive financial plan. The provider won’t track your progress unless you request and pay for more time.

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One price for all plans

For the creation of a financial plan, some consultants demand a fixed fee. Executing the plan on your own eliminates the need for continuous management or supervision.

• Price: A financial plan will usually cost around $3,000, though the cost might vary depending on the service.
• What is included in the price:Detailed financial planning with implementation instructions, but without continuing support or investment management. There is a flat rate for all of the advisor’s services. We lay out the price and scope of the service for you right from the start.

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Commission

Investment advisors may deduct commissions from your hard-earned cash for the assets they recommend.

• Price: 3% to 6% of your investment is the typical range for mutual fund sales loads, though this might vary depending on your investment. This is a one-time cost that is paid when the fund is bought or sold.

What this price gets you:Investment management is usually the exclusive focus. Avoid commission-based financial advisors, as we regularly advise: Though some will prioritize your requirements, others may be more interested in the highest-commission goods. Your advisor may have to recommend investments that suit you, not the best ones.

Important considerations when choosing a financial advisor

Make sure you know what you’re getting into and how much it will cost before committing to any financial planning service. Given the wide variety of payment methods, that is of paramount importance. Please familiarize yourself with these terms before hiring an advisor:

• A fee-only advisor does not earn investment commissions. When providing guidance, these advisors encounter few conflicts of interest. They might nevertheless combine multiple fee structures; for instance, they could charge a percentage of assets under management (AUM) for investment management and a set amount for financial planning.
• An advisor who works on a fee basis may take commissions from investments in addition to charging clients a fee. Many advisors combine an AUM fee with commissions.
• When they assist you in buying and selling investments, a financial advisor operating on a commission basis generates revenue.