You have big goals you want to reach with your money, and a financial advisor can help you get there. Financial advisors—whose titles may include financial planner, wealth advisor, or wealth manager—work with people like you who need advice on budgeting, saving, retirement planning, and taxes. They bring knowledge, expertise, and training to the table that the average person may not have.
But how much does a financial advisor cost? And is it worth it to pay a fee for financial advice? We’ll break down how much it costs to work with a financial advisor and help you decide when to pay for financial advice.
Table of Contents
Financial advisor fee structures
Financial advisors rely on a variety of fee structures to get paid. Let’s look at some of the most common financial advisor fee structures to learn how they work.
Assets under management (AUM) fees
- What it means: Advisors calculate fees as a percentage of assets managed
- Typical ranges: 0.5% to 2% (average fee = 1.05%)
- What to know about this structure: According to an Envestnet survey, a majority of advisors (62%) use an AUM model. Advisors may tier AUM fees, which means that as the amount of assets they manage for you increases, the fee decreases.
Pros and cons of AUM fees
Flat fees
- What it means: You pay a flat fee for an advisor’s services
- Typical ranges: $1,000 to $3,000 (average fee = $2,554)
- What to know about this structure: Flat fees are the second-most popular fee model, with 40% of advisors charging them. Advisors may charge flat fees to create a financial plan, for a single meeting or series of meetings, or a one-time planning project.
In my experience, the ranges can be much higher based on the clients’ complexity, typically up to $10,000.
Pros and cons of flat fees
Commissions
- What it means: Advisors earn fees when they sell certain investment products
- Typical ranges: 1% to 10%
- What to know about this structure: Commission-based advisors make money based on the type and number of products they sell. They can also charge AUM fees, flat fees, hourly fees, or other fees for their services.
Pros and cons of commissions
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Commission-based advisors aren’t always required to act in your best interests when recommending investments -
A commission fee model could lead to conflicts of interest on the advisor’s part
Hourly fees
- What it means: Advisors charge for their services by the hour
- Typical ranges: $200 to $400 (average fee = $268)
- What to know about this structure: Hourly fees mean you only pay for the time an advisor spends working on your financial plan. Around 18% of financial advisors charge fees on an hourly basis.
Pros and cons of hourly fees
Subscription fees
- What it means: You pay recurring fees, usually monthly, quarterly, or annually
- Typical ranges: $200 to $400 (average fee = $215/month)
- What to know about this structure: You pay fees for specific services on an ongoing basis. Subscription fee models aren’t as popular as other options; only about 5% of advisors use them, though that number is expected to grow.
Pros and cons of subscription fees
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It may be challenging to find an advisor who offers a subscription model -
Subscription fees are typically updated annually, so your cost to work with an advisor can increase over time
Retainer fees
- What it means: You pay an annual, monthly, or quarterly fee for an advisor’s services
- Typical ranges: $2,000 to $8,000 (average fee = $4,484/year)
- What to know about this structure: A retainer fee model lets you pay one fee to cover the services you receive, regardless of the amount of assets under management. Fourteen percent of advisors use retainer fees to bill clients.
Pros and cons of retainer fees
The biggest mistake I see clients make when comparing fees and searching for advisors is not knowing what you need from the advisor. Start by identifying the two to five main reasons you’re seeking help, and then look for a firm that aligns with those needs. Just like when you choose a doctor, you wouldn’t see a podiatrist if you need heart surgery. Another common mistake is being unprepared. Use resources like the CFP Board’s list of 10 questions to ask a financial advisor to guide your search and ensure the advisor is a good fit.
Financial advisor cost scenarios
With different fee models, it can be difficult to estimate the cost of working with a financial advisor.
We have several examples to illustrate how much you might pay in three scenarios:
- Young professional with $50,000 in assets
- A mid-career individual with $500,000 in assets
- A retiree sitting on $2 million
We’ll use the average fees included for each type of fee model above to estimate costs.
AUM
Let’s start with AUM fees since they are the most popular. Based on an average 1.05% fee, you’ll pay…
- $525 with $50,000 in assets
- $5,250 with $500,000 in assets
- $21,000 with $2 million in assets
These numbers assume that your AUM doesn’t change over the year. If your portfolio value grows thanks to your advisor, your fee could grow too.
Keep in mind that these are examples only. Most advisors charge a different percentage fee for different asset amounts, not 1.05% regardless of the total assets.
Flat fee
Flat fees are a little easier to estimate. Whether you pay more or less depends on your financial situation.
- A young professional who needs a one-time meeting might pay $2,554 on average.
- Someone who’s midcareer might need two planning sessions per year, which adds up to $5,108.
- Meanwhile, a retiree may pay $10,216 annually for quarterly meetings.
Hourly
Let’s say a young professional requires one hour of planning per month, a midcareer professional needs four, and a retiree requires six.
An advisor’s time will cost them…
- $268/month ($3,216/yr)
- $1,072/month ($12,864/yr)
- $1,608/month ($19,296/yr)
Again, these are averages. Actual numbers may vary.
Subscription
Subscription fees may be more affordable than other options, making them attractive to younger and mid-career investors.
An average fee is $215, which adds up to $2,580 annually. But what if you pay $300 a month because you have $500,000 in assets? Or $400 to manage your $2 million portfolio?
In those scenarios, you’re looking at $3,600 to $4,800 in subscription costs.
Retainer
An annual retainer fee simplifies billing, regardless of how much or little you have in assets. The average retainer fee is $4,484 yearly, but you may pay more or less based on the size of your portfolio.
For example, a young professional may pay $2,000 instead, while a wealthier retiree may pay closer to $8,000 per year.
| Young professional | Mid-career | Retiree | |
| AUM | $525/yr | $5,250/yr | $21,000/yr |
| Flat fee | $2,554/yr | $5,108/yr | $10,216/yr |
| Hourly | $3,216/yr | $12,864/yr | $19,296/yr |
| Subscription | $2,580/yr | $3,600/yr | $4,800/yr |
| Retainer | $2,000 | $4,000 | $8,000 |
AUM fees cost the least for people with fewer assets, which makes them appealing if you’re just starting to build wealth.
When should you pay for financial advice?
The best way to gauge an advisor’s worth to you is to consider what you need help with most and what you’d be willing to pay. Comparing fees for multiple advisors allows you to see what different professionals charge for the same services.
Client testimonials can also shed light on how much value people feel they’re getting. You can also check the Better Business Bureau and consumer review websites to see what others say about an advisor.
It can make sense to work with an advisor if you feel stuck with your planning progress or want expert insight on where you can improve. Higher fees may be justified if you have a larger portfolio to manage, but consider how the cost corresponds to the rate of return your advisor generates.
If you’re unsure where to start finding a financial advisor, try Money Pickle. It’s a free service that matches you with a vetted advisor for a 45-minute call.
Hidden costs and additional fees
Transparency matters when working with an advisor, and you need to be sure they’ve fully disclosed all fees. Other expenses you could run into include:
- Expense ratios. An expense ratio is the cost you pay to own a mutual fund annually. The average expense ratio is 0.42%, though some funds are much more expensive.
- Trading fees. Trading fees may apply when investments are bought or sold in your portfolio. These fees vary based on the type of transaction.
- Surrender fees. If you have an annuity and decide it’s no longer right for you, you might pay a surrender fee to sell it or cash it out. These fees typically range from 1% to 7%.
Ask your advisor for a detailed fee schedule. If there are fees listed that you don’t understand, ask for an explanation. And if an advisor seems hesitant to answer fee questions, that may signal that you need to look for advice elsewhere.
For another resource on advisor fees, check out this survey by AdvisoryHQ and Kitces.
