Investing in financial guidance is an investment in your future. The right advisor can help manage your wealth, plan for retirement, navigate tax implications, and more. However, understanding the costs associated with these services can be complex. Here’s a deep dive into the average fees of financial advisors, in 2024.
Table of Contents
- Understanding Financial Advisor Fee Structures
- Average Financial Advisor Fees in 2024
- How to Evaluate a Financial Advisor
- Comparing Different Types of Professional Certifications for Financial Advisors
- Financial Advisor FAQs
Understanding Financial Advisor Fee Structures
Investing in financial guidance is an investment in your future. The right advisor can help manage your wealth, plan for retirement, navigate tax implications, and more. However, understanding the costs associated with these services can be complex. Here’s a deep dive into the average fees of financial advisors, in 2024.
- Fee-only: Advisors only receive payment from their clients for the services they provide, not receiving any commissions or other incentives from product providers.
- Fee-based: This structure is a blend of fees and commissions. Besides the fees paid by clients, fee-based advisors may also receive commissions on certain financial products they sell.
Keep in mind that many financial advisor certifications and distinctions, including the Certified Financial Planner (CFP), uphold strict ethical standards, and require their financial advisors to act as a fiduciary, meaning that they must put the needs and best interests of the clients ahead of their own.
Average Financial Advisor Fees in 2024
Understanding the costs involved in financial planning is critical to making the most of your wealth and financial potential. Here, we’ll break down the different types of non-commission fees that financial advisors charge in 2024.
Average Financial Advisor Fees in 2024 | |||
| Fee Type | Fee Description | Typical Cost* | Examples |
| (Traditional) Assets Under Management (AUM) | Afee based on the percentage of your total managed assets. | Between 0.5% and 2% | A $500,000 portfolio could cost between $2,500 and $10,000 per year. |
| (Robo-Advisor) Assets Under Management (AUM) | A fee based on the percentage of your total managed assets. | Between 0.25% and 1.0% | A $500,000 portfolio could cost between $1,250 and $5,000 per year. |
| Hourly Fee | Fee charged per hour of advice. | Between $120 and $300 per hour | A 2-hour consultation could cost between $240 and $600. |
| Fixed Fee | A flat fee charged for a specific service. | Between $1,000 and $3,000 | A comprehensive financial plan could cost $2,000. |
| Retainer Fee | A set annual fee for a predetermined set of services. | Between $6,000 and $10,000 per year | An annual relationship with a financial planner could cost $8,000. |
*Costs can vary based on the complexity and scope of services provided. Therefore, costs can be higher or lower than what is reflected in this chart. The ranges provided are related to the cost charged by the Financial Adviser and do not incorporate additional expenses associated with implementing a financial plan, such as custodial or transaction costs.
These average costs should help guide you in selecting the right financial advisory services that fit both your financial goals and budget.
Assets Under Management (AUM)
Traditional financial advisors typically charge a fee based on the percentage of assets under management. The percentage charged usually depends on the value of the assets the advisor is managing. This percentage generally falls between 0.5% and 2%, often decreasing as the size of the assets managed increases, and generally includes year-round portfolio management. Wealth management for high-net-worth individuals is typically billed using as AUM model as well. On the other hand, mass-market robo advisors typically charge lower fees than traditional advisors at 0.25% to 1.00% but usually don’t offer the same personalized guidance as a traditional advisor without paying added fees.
Fixed or Flat Fees: Some financial advisors operate on a flat rate fee for their services, with the average rate also often dependent upon the amount invested. Fixed or flat fees can generally range from $1,000 to $3,000 or more, depending on the complexity of your financial situation and the services needed.
Average Hourly Fees
Some financial advisors do not charge based on assets under management but instead assess an hourly fee for the services they provide. The average hourly fee charged is typically between $120 per hour and $300 per hour and can vary depending on a number of factors, such as the metro area, educational background, and level of experience the advisor has attained.
The per-hour fee structure is often used by financial advisors offering advice on estate planning, debt management, tax strategies, and Social Security claiming strategies. Many financial planners will do a portfolio management review and provide investment advice for an hourly fee as well.
Average Annual Retainer
Finally, there are investment advisors that charge a set annual fee and provide financial assistance as needed throughout the year. The retainer under these circ*mstances is usually determined based on the complexity of a client’s financial situation, and in 2024 can range from $6,000 to $10,000 depending on your geographic location and your needs.
How to Evaluate a Financial Advisor
Financial advisor costs are only one aspect of selecting the right professional to help manage your money. Here are other essential points to consider when evaluating a financial advisor:
- Check Credentials: Review the advisors’ qualifications to see if working with an adviser with a professional designation is right for you, such as CFP, ChFC, or CFA designations.
- Ask About Experience: Experience in financial planning and specific areas of expertise that align with your needs are vital.
- Understand Their Fee Structure: Confirm that the advisor’s fee structure aligns with your budget and preferences.
- Fiduciary Status: Certain clients prefer to work with an advisor who is a fiduciary, meaning they are obligated to act in the client’s best interests.
- Reviews and References: Check online reviews or ask for references to gauge the advisor’s reputation.
Comparing Different Types of Professional Designations for Financial Advisors
Selecting a financial advisor who meets your financial planning needs is crucial. There are many different types of financial advisors, each with varying specialties and certifications. Here, we will highlight four common professional designations that financial advisors can obtain:
Certified Financial Planner (CFP): Issued by the Certified Financial Planner Board of Standards, Inc., a CFP is skilled in broad financial planning, from taxes, insurance, savings, and investments. To become a CFP, candidates must fulfill several requirements:
- Education: Bachelor’s degree or higher from an accredited college or university.
- CFP Exam: Successful completion of the CFP exam.
- Experience: Minimum of 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of Apprenticeship experience that meets additional requirements.
- Ethics: Agreement to adhere to high ethical standards and the CFP Board’s Code of Ethics and Standards of Conduct. A background check is also conducted.
- Continuing Education: Completion of 30 hours of continuing education every two years.
For a complete list of requirements, visit the CFP Board’s website.
Chartered Financial Consultant (ChFC): This designation is issued by The American College of Financial Services. ChFCs have undergone extensive education and experience requirements, focusing more heavily on practical applications of financial planning. Requirements include:
- Education: Completion of nine college-level courses.
- Exams: Successful completion of exams associated with each of the nine courses.
- Experience: Minimum of three years of full-time business experience within the five years preceding the awarding of the designation.
- Ethics: Adherence to a strict code of ethics and standards of professional conduct.
For more details, visit The American College of Financial Services website.
Chartered Financial Analyst (CFA): Issued by the CFA Institute, this credential focuses on investment management. Requirements for the CFA include:
- Education: Bachelor’s degree or four years of professional work experience (or a combination of both totaling at least four years).
- Exams: Successful completion of three levels of exams.
- Experience: Four years of qualified investment work experience.
- Ethics: Adherence to the CFA Institute Code of Ethics and Standards of Professional Conduct.
For more details, visit the CFA Institute website.
Certified Investment Counselor (CIC): The CIC designation indicates a focus on investment management. Requirements for the CIC include:
- Education: The CIC candidate must hold the CFA designation or have at least five years of experience in investment decision-making.
- Experience: Substantial practical experience in investment management.
- Ethics: Adherence to a high standard of ethical conduct.
For more details, visit the Investment Adviser Association website.
Financial Advisor FAQs
1. What Is the Difference Between a Fee-Only and a Fee-Based Advisor?
A fee-only advisor only receives payment from their clients for the services they provide and does not receive any commissions or other incentives from product providers. A fee-based advisor, on the other hand, can also receive commissions on certain financial products they sell, besides the fees paid by clients.
2. How Much Should I Expect to Pay for Financial Advice?
The cost of financial advice varies based on the advisor’s fee structure and the complexity of your financial situation. On average, you can expect to pay between 0.5% and 2% of your total assets under management annually, $150 to $400 per hour, or a flat fee ranging from $1,000 to $3,000 for a comprehensive financial plan. Costs can depend on various factors, including whether you work with a local traditional advisor, online financial planning services, or a robo-advisor.
3. What is a Fiduciary?
A fiduciary is an individual or organization that is obligated to act in the best interests of another party. In the context of financial planning, a fiduciary financial advisor must give advice that is in the best interest of their clients, putting the client’s interest ahead of their own.
4. How Can I Check an Advisor’s Credentials?
You can verify an advisor’s credentials by checking the relevant issuing body’s database. For example, you can check if an advisor is a CFP by using the CFP Board’s online directory.
Investing in financial advice can provide meaningful returns over time by helping you understand and navigate investment risks, and directing you on a path towards achieving your financial goals more effectively. Understanding the landscape of financial advisor fees and cost structures can ensure you find the right fit for your needs and budget.
Find Your Next Financial Advisor at Harness
At Harness, we’re committed to helping you navigate the complexities of financial advisory services. Our network of financial advisors is here to help with your unique financials, from startup equity tax planning to comprehensive financial planning. If you need a financial plan that works for your unique goals and needs, sign up for Harness today.
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