How much does a financial advisor cost?
A plain-English guide to how advisors are paid, and the questions to ask before you hire anyone.
Book a free 20-minute callIt's the first question most people want answered, and it's often the hardest to get a straight answer to. Here is how advisor pay actually works, so you can compare apples to apples.
The four common ways advisors are paid
A percentage of assets they manage. You pay a yearly fee based on the size of the accounts the advisor manages, usually billed quarterly. The fee grows as your accounts grow and typically includes ongoing investment management and planning.
A flat or subscription fee. You pay a set amount, once or on a recurring basis, for a financial plan or ongoing advice. It doesn't depend on how much you have invested.
An hourly rate. You pay for the time you use. It works well for a one-time question, less well if you want someone watching over things year-round.
Commissions. The advisor is paid by the company whose product you buy, such as an annuity, insurance policy or certain investments. You may not see a separate bill, but the cost is built into the product.
Many advisors combine more than one of these. None is automatically good or bad. What matters is that you understand it.
What should be included
For an ongoing relationship, a reasonable expectation is a written plan, regular reviews, investment management where applicable, help with big decisions like Roth conversions and retirement income, and coordination with your CPA. Ask exactly what you get each year for what you pay.
Questions to ask any advisor
- How are you paid, from every source?
- What will I pay in total, in dollars, in a typical year?
- Are there fund or product costs on top of your fee?
- Do you act as a fiduciary on all of my accounts?
- What will you actually do for me each year?
How I handle it
On our free 20-minute call, I explain how I'm paid and what it would cost for your situation, in plain dollars, before you decide anything. If I'm not the right fit, I'll tell you.