The fee paid to a financial advisor is not a single average, but rather varies significantly based on the advisor's fee structure, the scope of services provided, and whether the service is automated (like a robo-advisor) or in-person. Financial advisors typically charge in one of several common ways, each with its own typical cost range.
Common Financial Advisor Fee Structures
Here's a breakdown of the typical costs associated with different financial advisor fee models:
| Fee Type | Typical Cost |
|---|---|
| Assets Under Management (AUM) | 0.25% to 0.50% annually for a robo-advisor; 1% for a traditional in-person financial advisor. |
| Flat Annual Fee (Retainer) | $2,000 to $7,500. |
| Hourly Fee | $200 to $400. |
| Per-Plan Fee | $1,000 to $3,000. |
Understanding these distinct fee structures is key to determining the potential cost of engaging a financial advisor.
Assets Under Management (AUM)
This is one of the most prevalent fee structures, especially for advisors who manage investment portfolios on behalf of their clients.
- How it works: The advisor charges a percentage of the total assets they manage for you. As your investments grow, the dollar amount of the fee will also increase.
- Typical Range: For a traditional, in-person financial advisor, this fee commonly ranges around 1% annually of the managed assets. Robo-advisors, which offer automated investment management, typically have much lower AUM fees, ranging from 0.25% to 0.50% annually.
- Example: If you have $750,000 in assets managed by a traditional advisor charging 1% AUM, your annual fee would be $7,500. If you use a robo-advisor at 0.40%, the fee would be $3,000.
Flat Annual Fee (Retainer)
Some advisors opt for a fixed annual fee for their ongoing services, regardless of the amount of assets under management.
- How it works: Clients pay a set amount each year for comprehensive financial planning, advice, and regular consultations. This model can be particularly advantageous for individuals with substantial assets, as the fee does not directly scale with asset growth.
- Typical Range: Flat annual fees for financial advisors commonly fall between $2,000 and $7,500 per year.
Hourly Fee
For individuals seeking advice on specific financial matters or those who prefer to pay only for the time an advisor spends, an hourly fee model is often available.
- How it works: You pay the advisor for the actual time they dedicate to working on your financial plan, offering consultations, or providing specific advice. This structure is well-suited for one-time planning needs or project-based engagements.
- Typical Range: Hourly rates for financial advisors generally range from $200 to $400 per hour.
Per-Plan Fee
This model involves a one-time charge for the development of a tailored and comprehensive financial plan.
- How it works: The advisor creates a customized financial plan for you, covering various aspects such as retirement planning, budgeting, investment strategies, and debt management, for a single, upfront cost.
- Typical Range: A typical per-plan fee can range from $1,000 to $3,000.
