What are Typical Financial Advisor Fees?
Updated on Mar 02 2018
If you are like many Americans, you probably wonder whether you should hire a professional financial advisor or planner. Retirement planning is important today more than ever before as people are living longer and can’t rely on work pensions and built-in retirement plans of days past, which is why an expert opinion is enticing. The big question is cost and whether the investment makes sense for your unique situation.
Traditional Financial Services Fees
Financial services fees vary by professional and their level of expertise. Many financial experts and representatives collect a combination of fees and commissions, also known as term fee-based. These advisors have their own model of how they are compensated, so make sure to ask for a breakdown of their costs, both fees and commissions, so you understand where the charges are coming from.
Most fee-only financial planners typically charge between $1,000 and $2,000 for a comprehensive financial plan. They typically take a holistic approach to your finances to focus on the following:
- Your debt
- Your spending decisions
- Your investments
If you choose to have an ongoing relationship, you can expect to pay a monthly retainer of a couple hundred dollars. Financial planners who are just starting out can often be less expensive than seasoned professionals; although if they are affiliated with a specific institution the costs will typically be the same.
Certified financial advisors are investment advisors who specialize in managing investments for you. Most fee-only investment advisors charge a fee equal to a percentage of your invested assets. The industry benchmark is one percent, although this amount fluctuates by advisor and location.
Some advisors offer a fee structure that the percentage goes down as your assets grow, and some advisors get paid from banks and investment companies. While advisors may advertise that the offer “free” advice, there is usually earned commissions from the investments they sell you. Over time, being in the wrong investments may actually cost you more than paying a fee-only advisor, so you need to be careful with this pay structure.
Educate yourself on how financial advisors are compensated to discover what makes the most sense for your financial situation. Discover the most common ways financial advisors and planners charge fees to learn how much a financial advisor costs.
Should You Hire a Financial Expert?
Whenever you meet with a financial advisor, ask questions about how he or she is compensated. Transparency is huge when it comes to trusting someone with your money. Other than that, the decision to hire a financial advisor requires a careful cost to benefit analysis. Chances are, though, you can find an advisor who is more affordable than you think.
While hiring an expert can be a big decision, it is a solid investment in your future. Financial planners and advisors’ fees and costs vary, so it’s important to do your research and choose someone whose services match your needs—and whose fees coordinate with your pocket book.
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