How Much Do Financial Advisors Make?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.

Written By

Reviewed By

Updated on Wednesday, March 24, 2021

The median annual salary for a financial advisor is $87,850, based on the most recent figures available from the U.S. Bureau of Labor Statistics (BLS). Earnings can vary widely depending on the type of work a financial advisor does, their level of education and where in the country the advisor is located.

If you’re considering hiring a financial advisor, you’re probably more interested in how much money you’ll be paying out of pocket for this person’s services. That’s why it’s important to consider how advisors make money.

Average financial advisor salary

As mentioned above, the median salary of a financial advisor is $87,850 per year, or roughly $42.24 per hour, per 2019 data from the BLS. However, the annual earnings of a financial advisor can depend on many factors. The BLS data on financial advisor pay only includes salaries and doesn’t take into account any individual commissions or bonuses that employees might earn.

Pay can also vary depending on the type of advisory work someone does. The BLS found that financial advisors who work in securities, commodities contracts and other financial investments tend to earn the highest salaries. On the other hand, advisors who work with insurance products earn lower salaries, on average.

Education and training can vary widely among financial advisors and can also play a significant role in someone’s earning potential. Financial advisors typically need to have only a bachelor’s degree. However, a master’s degree or certification, such as the certified financial planner (CFP) designation, can increase the amount someone can earn.

Financial advisors are on the higher end of the earning spectrum among similar roles in the financial services industry. The median salaries for advisors is higher than occupations such as insurance sales, real estate brokers and financial analysts. However, financial advisors make significantly less than financial managers, who advise organizations rather than individuals.

A state-by-state look at how much financial advisors make

The average financial advisor salary varies depending on where you live. In general, financial advisors earn higher salaries in the Northeast, where employment for this occupation is highest. Advisors tend to earn the lowest salaries in Hawaii, the Midwest and the South.

According to data from the BLS, the states where financial advisors earn the highest average salaries are:

  1. New York: $166,790
  2. District of Columbia: $150,310
  3. Illinois: $142,440
  4. Connecticut: $137,440
  5. Massachusetts: $137,050

The states where financial advisors earn the lowest average salaries are:

  1. Hawaii: $82,890
  2. Tennessee: $84,420
  3. North Dakota: $85,670
  4. Iowa: $86,480
  5. Oklahoma: $87,130

In addition to the state, it’s also important to consider other location factors. Surprisingly, while employment levels for financial advisors are highest in New York, Los Angeles and Boston, this isn’t necessarily where they make the most money. Metropolitan areas with the highest financial advisor salaries include Montgomery, Ala., Santa Fe, N.M., and San Luis Obispo, Calif.

How do financial advisors get paid?

Now that we’ve discussed how much financial advisors earn, it’s also important to discuss how financial advisors make money. There are four common pay structures for these professionals, which we outline below:

  • Fee-only: Many financial advisors make money by charging clients a fee, whether that is a certain percentage of assets under management, an hourly fee or a fixed fee. A typical advisor fee is 1% to 2% of a client’s assets invested with the advisor. In other words, if a financial advisor managed $100,000 for a client with a 1% fee, that client’s annual fee would be $1,000.
  • Commission-based: A financial advisor who earns commissioned-based compensation makes money by recommending products to clients. Rather than making money from their clients, these advisors actually make money from the companies whose products they recommend.
  • Hybrid: Another common way for financial advisors to make money is through a combination of fees and commissions. This type of advisor charges a fee, perhaps as a percentage of assets under management, but they may also earn a commission from the products they recommend.
  • Salaried: Depending on their employer, some financial advisors might earn a salary from their employers. Some advisors might get paid entirely through a salary, while others have a base salary and make the rest of their money through commissions. For example, Edward Jones pays its advisors a salary for their first four years, and it slowly decreases as they are expected to earn more in commission each year.

As a client, it’s important to consider how your financial advisor gets paid. At first blush, it might sound more attractive to hire a commission-based advisor, since their pay doesn’t come directly out of your wallet. But ultimately, the party paying the advisor might be the one whose best interest is prioritized.

When a financial advisor relies on commissions to earn a paycheck, they have an incentive to sell you certain products. As a result, potential conflicts of interest could arise. But when you hire a fee-only financial advisor, the advisor’s recommendations can solely revolve around what’s best for you.

Is hiring a financial advisor worth the cost?

You may find yourself wondering whether hiring a financial advisor is really worth the cost. And while it’s not the right move for everyone, there are some situations that might warrant bringing in professional help, including:

  • You’re going through a major life change that affects your finances
  • You have a complex financial situation you aren’t sure how to navigate
  • You want to get financially ready to retire
  • You want someone else to manage your investments for you
  • You’re struggling to identify the next steps in reaching your short-, medium- and long-term financial goals

When you’re deciding whether to hire an advisor, it’s important to consider how that expense would fit into your budget. Also keep in mind that you may pay additional costs outside of your financial advisor’s fee, such as expense ratios or transaction fees associated with the investments in your portfolio.

Financial advisor alternatives

In some scenarios, a financial advisor might not be the right fit. Maybe you have a good handle on your goals and feel confident navigating your own finances, but you just need a way to start investing. There are a couple of other options you could consider:

  • Robo-advisor: A robo-advisor is a digital investing service that selects investments on your behalf based on the information you provide. You answer several questions about your investing goals and time horizon, and the computer algorithm chooses your investments. Robo-advisors are intended to be entirely hands-off and these services typically have lower fees than hiring a financial advisor.
  • DIY investing: If you feel confident researching and selecting investments yourself, you might consider going the do-it-yourself route. Online brokerage firms make it easy to invest without the help of an advisor. This type of investing is best suited for those people who are prepared to do a significant amount of research and who feel comfortable navigating the market themselves.

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.