How much does a financial advisor cost
Many people believe that financial advice is only for the elite, but that couldn't be further from the truth. Today, there are plenty of financial advisors who cater to all types of clients, from those with just a few hundred dollars to invest, to those with millions. Some advisors even offer a subscription-based model, which is perfect for younger professionals who want the guidance of an advisor without committing to a traditional fee structure and ongoing relationship.
When it comes to pricing, there are several options available to clients. Some advisors charge a flat fee for their services, while others charge a percentage of the assets under management (AUM). This is known as an AUM fee and it's usually around 1% of the amount you invest with that advisor.
It's important to remember that working with a financial advisor is not just about investing your money. They can also help you with taxes, real estate, income and cash flow planning, employee benefits, hedging strategies, and estate options. These are all important factors that can impact your overall financial well-being.
Having proper financial advice can change a person’s life, but many people don’t know what advisors ACTUALLY do or how much they cost. And there’s millions of people who think they can’t afford to work with an advisor, so they end up going at it alone.
Let’s break down some of the wealth management barriers for you.
NOTE: Our team at AdvisorFinder does not advise clients, but rather we help people find and research financial advisors, as well as make financial advisors more accessible.
What do you want to pay?
What you want to pay depends on a few things: what services you need and how long you need them for.
If you’re looking for a one-time financial plan, you can expect to pay a one-time fee. The cost often depends on the complexity of your plan.
If you’re looking for on-going services and investment management, you’ll typically pay a percentage of Assets Under Management (AUM) or a fixed fee.
Be cautious with advisors who charge commissions - it’s an old way of doing business and usually costs the client more.
Here are some of the most common questions we’ve heard from people who are searching for advisors:
How much does it really cost?
Nowadays, there are plenty of advisors who work with clients for the cost of a monthly gym membership or an annual flat fee. Some advisors work with clients on an advice-only basis, which means they don't offer ongoing investment management, which can save clients money if the client wants to do the investing themselves. In return, an advice-only advisor will help their clients develop a plan for a flat dollar amount. As you can see, there are many different pricing models that are more attractive to some clients who want lower-cost options without sacrificing the level of advice they receive. The 'new kid on the block' is the subscription-model. The subscription-model is great for younger professionals who want the advice of an advisor, without the commitment of paying a traditional AUM fee. There are options for anyone!
In most cases, financial advisors charge a 1% fee of the amount of money you invest with that advisor. This is called an AUM fee, a percentage of the Assets Under Management.
As you can tell, there are ample options for your unique situation. Also, it’s not always about where you currently are but more about where you want to be in the future. Your advisor can help you plan for your future, so you can sleep better at night without thinking about financial stress.
Do I have to move over all my money?
You can move as much or as little as you want. In some cases, you don't have to move over any of your money, but this depends on the type of advisor you work with. You and your advisor should assess your current situation and determine what the best plan of action is for you. When you decide to work with an advisor, you don't have to move all your money over at once! Additionally, working with a financial advisor isn't only about investing your money. A financial advisor will likely look at opportunities to help you with the following:
- Real Estate
- Income and Cash Flow Planning (Active & Passive)
- Employee Benefits
- Hedging Strategies
- Estate Options
Many people look at financial advisors and just think about the stock market and how a financial advisor can help them invest their money. However, looking at the list above, you should feel confident that advisors go far beyond investments. Your financial advisor should look at both sides of the balance sheet and help you feel less financially stressed.
When am I ready to work with an advisor?
It depends, but here are a few common reasons that people seek professional financial advice:
- Looking to buy a house
- Getting married soon (or recently married)
- New job
- If you're not confident investing alone
- Starting a family
- If you receive equity compensation
There are dozens of reasons why people choose to work with a financial advisor.
Above all, financial advisors are much more accessible than you think. They don't only work with the ultra-wealthy.
Here are a few things you can expect from an advisor based on the above reasons:
- Help to decide how much to spend on a house and guidance on how to buy it
- Looking over estate planning documents and assessing life insurance needs, especially if you have a family that depends on you
- Help navigate your equity compensation and stock options
If you're an adult with income and financial goals, you could probably benefit from unbiased external financial guidance. There is no "right" age or time to begin working with an advisor, but starting in your late twenties and early in your career can be a great time to get started with a financial advisor. The latter is especially true if you’re looking to settle down, thinking about marriage or kids in the next few years, working a high-paying job, or have financial stress from everyday life. Life itself can get in the way of your goals. Managing your finances can be stressful, especially when you have a full-time job or if you don't feel confident about planning for your and your family's financial future. Planning ahead will help you prepare for life’s greatest moments and challenges, which is where a financial advisor can help.
People don’t plan to fail, but fail to plan. We’ve heard over and over, “I’m too young to work with an advisor” or “I’ll wait until I settle down," but financial advice can be invaluable.
By responding to some of the most common misconceptions people have about financial advisors, we help people feel more financially secure knowing that they have access to financial advisors who are there for them. The team at AdvisorFinder believes it’s crucial to address these misconceptions about financial advisors in order to help people reduce the stress and anxiety they have in life which stems from their financial situation.