How much does a financial advisor cost? 2024 costs and fees (2024)

Key points

• Financial advisors can be paid through commissions, hourly, flat or advisory fees, or a combination.
• You can learn about advisor fees on Form CRS for brokers or Form ADV for investment advisors.
• Robo-advisor fees tend to be lower, but that’s because they give less personalized guidance.

Working with a financial advisor can present a dichotomy. On the one hand, you want the best guidance you can buy. On the other hand, you want to keep your costs as low as possible.

You can view it as an investment. You’re paying money in the hopes it will help you make even more money than you pay for the advisor long term. But for that to be true, you must ensure you get enough value relative to the fees you pay. And to do that, you must know what you pay and if the price is fair for the services you receive.

We’ll explain how financial advisors are compensated and what costs to expect when hiring one.

How financial advisors are paid

There are three common ways financial advisors are paid:

1. Commissions: Advisors earn a commission for the products they sell to clients, such as life insurance policies or annuities.
2. Hourly or flat fees: Advisors can charge hourly fees or flat fees for specific services. For example, an advisor may charge $2,000 for a comprehensive financial plan and then $200 per hour for help implementing it.
3. Advisory fees: These fees are often charged as a percentage of the assets you have under management with the advisor, called AUM fees. “These fees are usually billed and paid directly from the accounts,” said Brian Kuhn, senior vice president and financial advisor at Wealth Enhancement Group. AUM fees are often charged quarterly. For instance, if you have $1 million with an advisor who charges 1% per year, you’d pay $10,000 for the year, or $2,500 per quarter.

Advisors can charge one or more of the above fee types.

“For example, an advisor could simply charge a one-time fee to cover a certain amount of time spent together or a one-time fee to cover topics other than investment management and use the percentage specifically for managing the assets,” Kuhn said.

Fee-based advisors earn commissions and advisory fees, while fee-only advisors earn only advisory fees, not commissions.

“Commission-based advisory tends to be the most traditional fee model in our industry, while fee-only is somewhat newer and typical of registered investment advisory firms,” said Jane DeLashmutt O’Mara, senior portfolio manager at FBB Capital Partners.

All fees and commissions earned by a financial advisor — even online or robo-advisors — must be disclosed on Form CRS for brokerage firms or Form ADV for investment advisory firms, both of which must be given to new clients. Brokerage firms also must make fee information readily available to clients. This is often done through a hyperlink to the firm’s fee schedule.

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Fees to expect by service

The fees advisors charge vary based on the firm and level of service provided. Fees can be structured in a number of ways: flat, hourly or by a percentage of AUM.

Some firms use sliding scale fees, with high asset levels qualifying for lower fees. For example, a $50,000 account may incur an AUM fee of 1.18% per year, whereas a $5 million account may be charged 0.84% annually. If you have around $1,000,000 in investment assets, you might pay around 1.02% in AUM fees.

You can get an idea of how these fees stack up in the table below, based on the most recent data from AdvisoryHQ.

Typical costs of financial advisor fees

For flat fees, you might pay a fixed rate of $7,500 if you have around $65,000 in investable assets. For those with slightly more to manage, the fixed fees go up. Those with $1.2 million in managed investments can expect to pay around $12,500 in fixed fees.

In addition to these advisory fees, you might be charged fees, such as expense ratios and trading commissions related to the products in your portfolio.

“Often, clients are not aware of the embedded investment management fees associated with the products they own, so we recommend that you speak with your advisor about whether this is applicable to your situation,” O’Mara said.

Types of financial advisors

Thanks to technology, receiving financial advice is easier than ever. Investors can get help in whatever form they prefer, be it an in-person meeting with a “traditional” human advisor or over their computer or mobile device through a robo-advisor. There are even hybrid models that offer both robo and human financial advisors.

While each type of financial advisor has merits, it’s important to understand how your relationship and the level of guidance you receive will differ with each type of advisor.

Robo-advisors vs. “traditional” human advisors

If how much a financial advisor costs is a concern, a more economical way to get financial guidance can be to use robo-advisors. These digital platforms use algorithms to create portfolios based on your goals, time horizon and risk tolerance.

Robo-advisor fees typically range from 0.25% to 0.9% per year. Others charge monthly or annual subscription fees, such as $3 to $30 per month or $300 per year. You may also encounter a one-time initial planning fee. For instance, Charles Schwab’s robo-advisor starts with a $300 initial planning fee and then charges a $30 monthly fee.

How can robo-advisors charge so little compared to traditional human advisors? The answer lies in personalization.

Robo-advisors are algorithms that incorporate the variables built into their computer programs when creating a portfolio. If a robo-advisor looks at only financial goals, time horizon and risk, it won’t factor in your ailing aunt who requires a lot of financial support now but may leave a big inheritance later.

A human advisor, on the other hand, can take a more holistic view of your financial situation. A human can also provide emotional support.

“As a financial advisor, we often find ourselves in the role of counselors,” O’Mara said. “We stick with our clients through the many events that take place during a lifetime, and we encourage our clients to stay accountable to their goals and their plans — even when markets seem uncertain.”

Ultimately, it’s the steady hand and peace of mind a human advisor provides that may offer the most value to clients, O’Mara said.

So which is better, a robo-advisor or a traditional human financial advisor? It depends.

A robo-advisor may be best if:

• You’re just starting to invest.
• You want to automate your investing.
• You don’t need a lot of hand-holding.
• You have a fairly simple financial situation that can easily fit into a prebuilt portfolio.
• You don’t want help with anything other than investing.
• You think cost is king and want to minimize investing fees.

A human financial advisor may be best if:

• You have a complex financial situation with many moving parts and financial assets.
• You want a customized portfolio.
• You’d like guidance in areas beyond investment selection.
• You could benefit from an emotional sounding board during hard times.

Related: Find a Financial Advisor in 3 Minutes

Choosing the best financial advisor for your financial needs

If you decide a human financial advisor is right for you, the question becomes, “Which human?”

Kuhn said finding the best financial advisor comes down to three factors:

1. You understand what they say when they communicate with you.
2. They are available within a reasonable time frame if you want to talk to them.
3. What they say is going to happen is what happens.

Each factor can take time to verify, so do your homework and consider trying out a financial advisor to see if they are a good fit. The value-add of having a financial advisor is to have someone to talk to and lean on. So if you don’t understand the plan, the financial advisor is unresponsive or what is presented to you differs from the actions taken, then it may be time to make a change.

Cost should also be a consideration, of course. When you start working with an advisor, you should be given a fee disclosure, but feel free to discuss it.

“You should feel permission to ask questions and check in on your fees throughout the duration of your relationship to ensure that you understand the fees that are being charged,” Kuhn said. “If anything feels outside the line, find another advisor.”

Frequently asked questions (FAQs)