How Much Does a Financial Advisor Cost?

The cost of hiring and working with a financial advisor depends on their fee structure. Financial advisor costs are determined by a management fee, often referred to as an Assets Under Management (AUM) relationship or a flat fee relationship.

Below we will break down each of these advisor fee types in detail.

When it comes to advisor fees, the words “transparency” and “clear” rarely come up, even though they should. Any advisor that is offering “free” financial advice is most likely a commissioned broker. Unfortunately, free advice almost always leads to a propriety product or insurance product that earns them a commission. When an advisor is incentivized to sell you products, they are not legally obligated to work in your best interest.

What to Know About Financial Advisor Costs

At Zoe we invest time interviewing advisors for your peace of mind. All of Zoe’s advisors have been heavily vetted about their costs, fee structures, and their legal obligations to work as fiduciaries for their clients.

Assets Under Management (AUM)

This is a full-service financial advisor relationship where an advisor conducts ongoing financial planning and investment management for you. Potential financial advisors costs will be a percentage-based fee of the assets the advisor manages for you.

Is this the plan for you?

This is ideal if you are transitioning into retirement, or if you do not feel comfortable managing your investments on a daily basis. This is the most all-encompassing and full service you can get from a financial advisor. Most busy families opt into this relationship because of that.

AUM Fees: We see fees ranging from .80% to 1.5% of the assets an advisor manages. For example, if you were to hire an advisor under the AUM fee structure, and they managed $1 million dollars for you, their annual fee would be 1% of those investments, which would equate to a $10,000 annual advisor fee. This is not an out-of-pocket expense, the fees come directly from your investment account.

Thinking about something different?

If you do not want an advisor managing your assets or would like to begin in a less all-encompassing relationship. We see families start with a One Time Plan or Retainer option to later migrate to an AUM relationship when it makes sense.

Flat Fee Retainer

This is an agreed-upon ongoing flat-fee financial planning retainer to begin a relationship with a dedicated financial planner. Potential financial advisors’ costs will take the form of a monthly fee.

Is this the plan for you?

This is ideal if most of your assets are tied up in workplace retirement plans or stock options. You are younger in your financial journey and in the accumulator phase and would like ongoing guidance on how to save more, invest smartly, and plan for your short-term and long-term goals.

Fees: We see fees ranging from $100 to $500/month for a financial planning retainer.

Looking for something more?

The downside of this service is that an advisor is typically not actively managing your assets. You might want to upgrade to an AUM relationship if you feel you need more involvement from your advisor.

One Time Plan

This is an agreed-upon flat fee to conduct financial planning with a Zoe Advisor to build a financial plan. Potential financial advisor costs will be charged to you only once.

Is this the plan for you?

This is ideal if you have a narrow question or decision that needs to be made, or you are very comfortable self-managing your investments, but just want an advisor to help construct a plan.

Looking for something more?

The downside of a one-time financial plan is that it is a static document in time. Should your family’s situation change, most likely your plan will need updating. More often than not, families are opting into an ongoing relationship with an advisor so they can build a relationship and allow that advisor to be proactive in protecting their wealth.

Ask The Right Questions To Avoid Common Red Flags

Having the wrong financial advisors means working with someone who doesn’t have your best interest in mind. You may lose sight of what’s important to you and find it more challenging to fulfill your financial goals. If you’re in the process of finding your ideal advisor, make sure you’re on the lookout for the most important advisor red flags to spot before you make any decisions. Here are some the questions you should ask to understand financial advisor costs.

Do you receive any compensation from any investment company for recommending any of their products?

This should be a “No”. Some advisors will say that they do not receive commissions specifically, but they actually still receive backdoor kickbacks that you are paying via 12b-1 fees from mutual fund companies. Those additional fees can range from 0.25% to 1%, which can really add up!

Do you earn a commission from private funds or other investments?

The answer should be “No.” If they receive any type of commission, they will be biased and unable to work in your best interest.

Are all of your fees itemized in writing?

The answer here should be “Yes.” Just like when you receive your receipt at a restaurant, you want to know exactly what you’re paying for.

How many clients per ‘client-facing’ advisor does your practice have?

If the practice has more than 200 clients per advisor, then its important to find out how much support staff does the advisor have to service the client. If an advisor has primary coverage of 600 clients, it is fair to assume that they do not offer a high-touch service. Thus, fees should be well below what full-service advisors charge.