MagnifyMoney 
We’ve all been there. You’re shopping, and you see the perfect shoes. You pick them up. See the price. Yikes! Way out of your budget. You put the shoes back on the shelf.
Unfortunately, financial advisors don’t come with neat price tags on their shoes. As a result, it can be tough to know whether you can afford to work with an advisor — especially since financial advisor fees come in several different forms.
So, how much does a financial advisor cost?
It depends. But for advisors who calculate their fees as a percentage of assets under management (AUM) — the most popular way for financial advisors to charge — typical fees range from 0.59% to 1.18%.
To figure out the average financial advisor fees you can expect to pay, we did some number-crunching.
First, we gathered data from reports published by Advisory HQ, The Investments & Wealth Institute and Pillar Wealth Management. Then, we took the highs and lows for each type of fee to establish a reasonable fee range. While it’s not scientific, it saves you the legwork of reading all these studies and crunching the numbers yourself (though we still encourage you to do so).
So, how much do financial advisors cost? As of June 2022, these are the averages broken out by fee type:
| Fee | Typical cost | How it works |
|---|---|---|
| Assets under management (AUM) | 0.59% to 1.18% of AUM | Portfolio managers charge a percentage of the assets they handle for the client |
| Fixed fees | $7,500 to $55,000 | Advisors charge a set price, often for one-time services like creating a financial plan |
| Hourly fees | $120 to $300 per hour | Financial advisors can charge based on billable hours as a lawyer or accountant does |
| Performance-based fees | 0.15% to 0.75% of AUM | Some advisors earn a bonus by outperforming market benchmarks |
| Commissions | 3.00% to 6.00% of the sale | Companies compensate advisors for recommending certain products |
You can find various levels of financial planning and portfolio management services through traditional human advisors, online financial planners and robo-advisors.
Think of a traditional human advisor as a coach. They’re someone who can help you evaluate your current financial situation, short- and long-term goals and life circumstances to craft a winning game plan.
Human advisors typically provide both financial planning and asset management services. Depending on the advisor, you’ll likely have one of two options when it comes to managing your portfolio assets:
According to the Investment Adviser Association’s 2022 Industry Snapshot, here are the most common fee structures for investment advisors:
Nowadays, almost every financial planner charges fees as a percentage of assets under management, and very few advisors work with a commission fee model anymore.
Many financial advisors have a standard fee model, calculated as a percentage of assets under management. For example, if a client has $1 million invested in a firm that charges a 1% AUM fee, they’d pay $10,000 a year. Some firms have AUM fee tiers for different asset amounts, while others have the same fee for all portfolios.
According to Hank Smith, the Head of Investment Strategy at The Haverford Trust Company, in Radnor, Pa., the late 1980s saw advisors charging 3% of AUM for the new rage at the time: wrap accounts. These were accounts with all the commissions, expense ratios and more “wrapped into” the single 3% fee. Since then, Smith says the industry’s undergone what’s called “fee compression,” bringing the AUM fee down quite a bit to the range we’ve cited above.
Financial advisors will sometimes charge a fixed rate for a particular service. Those fixed fees usually apply to one-time services (like creating a financial plan) and don’t involve follow-up or ongoing services. Still, some financial advisors and online financial planning services will charge a flat advisory fee instead of an AUM fee.
Lawyers and accountants charge their clients a fee based on how many billable hours they work — and so do some financial advisors. Those fees can apply to meetings with your financial advisor for performance reporting, financial planning adjustments or portfolio management services.
Some advisors have incentives in their contracts for reaching portfolio performance benchmarks. For example, an advisor might charge their clients an additional fee if their portfolio outperforms a popular market index by a certain basis point threshold. Likewise, they could charge lower fees if they underperform on specific benchmarks. Unfortunately, those incentives can sometimes lead advisors to pursue riskier investment strategies rather than what’s best for their clients.
Occasionally, a financial advisor will receive compensation for recommending certain products (insurance, as an example) or investment strategies, and clients pay those costs. Advisors with commission-based fee schedules may not necessarily be fiduciaries. They may only be required by law to recommend suitable products or strategies — even if it isn’t the best possible advice.
Online financial planners are a hybrid between a traditional advisor employed by an advisory firm and a robo-advisor platform. Their financial planning services aren’t usually as extensive as a human advisor’s, but they can still provide more guidance than a robo-advisor — plus, the cost often falls in the middle.
A robo-advisor is a straightforward tool that automates your investing, factoring in considerations like your risk tolerance and retirement planning time horizon.
Beyond the management fees you’ll pay an advisor, there will often be additional costs which can include:
We pay for advice from experts all the time, but the fees you pay an advisor can have an impact on several areas beyond the financial advice you receive.
According to Joseph Maugeri — managing director for corporate relations for the CFP® Board, a leading certification body for financial advisors with advanced skills — says the advice you pay for should align with the complexity of your financial situation.
For example, if you have more complex financial needs or significant net worth, your overall fees will likely be higher. Meanwhile, if you’re just starting out and have a fairly simple set of investment needs, you can likely pay less in fees.
If you’re feeling overwhelmed by the idea of paying an advisor significant fees to help you plan and manage your financial future, there’s some good news:
There are ways to help minimize the fees you’ll pay for the services you need.
Once you’ve chosen a financial advisor and have your financial plan in-hand, Maugeri of the CFP Board says you should be sure to ask:
“What is the most cost-efficient way to implement my plan and receive the type of advice,
initial and ongoing, I need based on my situation?”
Your unique circumstances will determine which financial advisor is best for you, and their fee structure will be one of many factors to consider. Before signing an agreement with an advisor, think about these dynamics:
While financial advisors aren’t as transparent about what you’ll pay as shoe manufacturers are, we hope we’ve demystified their average costs. But, generally speaking, your financial advisor’s cost will be a percentage of the assets they manage on your behalf, plus fixed or hourly fees for financial planning.
The typical range for AUM fees is 0.59% to 1.18%, the typical range for fixed fees is $7,500 to $55,000 and the typical range for hourly fees is $120 to $300 per hour. Keep in mind, however, that each financial advisor has their own fee structures, and they may be open to negotiation.
Financial advisors can charge in many different ways for their services. Our data shows that a reasonable fee for a financial advisor is between 0.59% to 1.18% of assets under management (AUM).
According to 2021 data from the Bureau of Labor Statistics (BLS), the mean salary for financial advisors in the U.S. is $119,960 per year.
Alex Cook
