How Much Does A Financial Advisor Cost? (2024)

Working with a financial advisor can help you achieve both short- and long-term financial goals. This type of professional will work closely with you to analyze your current financial situation and create a personalized plan to help you progress financially.

All of that intimate, detailed work might make you think that a financial advisor will cost you a fortune. When it comes down to it, financial advisors often charge fees but can be accessible at relatively low costs.

How Much Does A Financial Advisor Cost?

The cost of your financial advisor will depend on what type of services you desire, the size of your portfolio and their compensation structure.

There is no standard fee or cost that applies to all financial advisors; some will charge more simply based on their credentials and certifications. A financial coach, for example, may charge less than a certified financial planner (CFP) and offer different, less intensive services.

Keep in mind that you should shop around for a financial advisor that will meet your needs, both in terms of creating a suitable financial plan and being affordable. That doesn’t always mean you’ll want to opt for the cheapest financial advisor that you find; sometimes, a financial advisor that charges higher fees will give you a more detailed and in-depth look at your finances.

Before settling on a financial advisor, always ask what their fee structure is, how they get paid and what is included in their price. You might find that one financial advisor offers more services than another for a better deal.

Related:Find A Financial Advisor In 3 minutes

Types of Financial Advisors

You can hire a financial advisor for almost anything. They can help you go over insurance needs, budgeting, savings plans, estate plans, investing strategies, stock options, employment opportunities, higher education choices, retirement benefits and more.

The top certifications for financial advisors are Certified Financial Planner (CFP), and Registered Investment Advisor (RIA). These both require extensive training, registration and the passing of thorough examinations. All RIAs and CFPs have a fiduciary duty, meaning they are legally and ethically bound to act in your best interests.

While other certifications exist, they do not follow the same rigorous standards, so due diligence is essential when working with other financial professionals. Words like “financial coach” and “financial mentor” are not regulated. When working with someone who identifies as these it’s imperative to review their background and ensure that they have the knowledge and ethics to be able to give you quality advice.

How Do Financial Advisors Get Paid?

Not all financial advisors are paid the same way. Their payment structures vary between flat fees, commissions or percentage of assets.

Fee-only

A fee-only financial advisor earns money from the fees you pay to them for their services. These fees can be an hourly or flat rate, or charged as a percentage of the assets they manage for you.

The benefit of working with a fee-only financial advisor is they are usually fiduciaries. A financial advisor that works under fiduciary duty is required by law to put their clients’ best interests above their own. These advisors will recommend financial plans and products that work the best for their clients, rather than just pushing ones that may earn them a commission.

Commissions

Financial advisors that work on commission make money by earning sales commissions from third parties. Some financial advisors that advertise themselves as “free” advisors who don’t charge fees for advice are actually earning money based on commission.

It’s important to proceed with caution if you’re considering a commission-based financial advisor. These advisors are not fiduciaries like fee-only advisors; they’re salespeople for investment and insurance brokerages.

They do not have to recommend the best products for their client’s individual needs; their recommendations only need to be suitable for the client.

That’s also not to say that all financial advisors that earn commissions are not trustworthy. Some financial products are only sold under a commission model, such as life insurance. Just be sure to keep in mind that these types of advisors are not held to the same standard of care as fee-only financial advisors.

Percentage of Assets

Another common way financial advisors charge clients is based on a percentage of the assets they manage for you. These percentages average around 1% per year (or 0.25% to 0.5% for robo-advisors). Individuals with a large amount of assets will benefit more from being charged lower percentage rates than those with smaller portfolios.

Should You Use a Robo-advisor?

Robo-advisors are automated software platforms that simplify investing. These services are also available at a much lower cost than in-person financial advisors, which may have some consumers thinking they’re a better deal.

Before using a robo-advisor because it’s affordable and accessible, you should keep in mind that they come with caveats.

Since these are software programs that manage your money, they’re not going to be able to tailor a financial plan that’s specific to your needs. The platform will ask you a series of questions about the current state of your finances, your financial goals and your overall risk tolerance, and then recommend a premade portfolio for you.

These portfolios typically include pre-selected, low-cost index fund exchange-traded funds (ETFs) and sometimes mutual funds.

Some robo-advisors come with the option of adding on personalized financial planning services for an additional fee. If you’re interested in using a robo-advisor, you could consider adding on this option to get more detailed assistance with your financial plan. Individuals with more detailed and complicated portfolios are likely to benefit more from using an in-person advisor completely, rather than just as an add-on with a robo-advisor.

How to Find a Financial Advisor

If you’re considering working with a financial advisor, you may not know where to start your search. Many professional financial planning associations provide free databases of financial advisors:

• NAPFA (National Association of Personal Financial Advisors)
• Garrett Planning Network
• XY Planning Network
• ACP (Alliance of Comprehensive Planners)

Before settling on a financial advisor, be sure you understand what services they’re offering, as well as all of the fees and costs they’ll charge—and whether or not they’ll be working in your best interest.