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How Much Does a Financial Advisor Cost?

The costs will vary according to how the advisors structure their fees. They may charge a retainer, hourly rate or flat fee, or they may earn a commission.
Advisors, Investing
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If you’ve been researching the cost of a financial advisor and coming up short, you should know: It’s not you, it’s them.

Financial advisor fees are about as transparent as a brick wall. Most advisors don’t list pricing on their websites, and even the organizations that support these advisors, like the Financial Planning Association and the National Association of Personal Financial Advisors, don’t collect data on average fees.

The issue, at least in part, is that there are many different ways financial advisors charge. It’s hard to distill that information, much less compare it in any kind of apples-to-apples way. Below, we’ve outlined the fees you’re most likely to run into when searching for an advisor.

Common financial advisor fees

There are five main ways a financial advisor might charge for his or her services, though some advisors use a combination of two or more.

1. A percentage of assets under management

Many advisors calculate their fee based on your assets under management — in other words, how much money the advisor is managing on your behalf.

Often, that calculation is based on a percentage of those assets and charged per year. If you have $500,000 in investment accounts and the advisor charges a 1% AUM fee, you’ll pay $5,000 a year for the management of those accounts.

This fee structure is one reason financial advice often seems geared toward the wealthy. Some advisors who charge based on assets managed don’t think the fee they’d collect on a small balance is worth their time. Many won’t take on clients with assets of less than $250,000.

Other fee structures outlined below are more suitable for small-dollar investors, as are robo-advisors, which use computers to build and manage client portfolios. That reduces the cost of investment management significantly, keeping fees and account minimums low.

Robo-advisors also typically charge as a percentage of assets, but that charge is significantly lower, and they often have a low or no minimum balance requirement.

Typical cost: 1% per year for a financial advisor; 0.25% to 0.50% per year for a robo-advisor.

» View NerdWallet’s picks for the best robo-advisors

2. A retainer for continued services

Some advisors who charge the kind of AUM fee outlined above manage only your investments; they may not provide comprehensive financial planning services. (Here’s a quick rundown of the major types of financial advisors.)

For holistic advice, seek out an advisor who also offers financial planning, rather than investment management only.

If you want holistic advice — guidance on things like how much you should be saving for retirement, how to allocate your money among competing goals or whether you have appropriate insurance coverage — seek out an advisor who also offers financial planning services, rather than investment management only.

One common way to charge for that kind of planning is an annual or monthly retainer. For that fee, the advisor typically will create a financial plan for you, help you implement it, monitor your progress and adjust things as needed. If you have trouble sticking to a plan or need help changing your behaviors, a retainer model may be for you because it provides ongoing oversight.

The cost of the retainer typically isn’t linked to how much you have available to invest. However, you may pay more if your financial situation is complex.

Typical charge: Between $2,000 and $7,500 a year.

3. An hourly rate

It’s an age-old model that still has legs: Some advisors simply set their rates by the hour.

Many of them are organized under a group called the Garrett Planning Network, whose mission is to make financial planning accessible. Think of this like a la carte financial planning; you pay for only what you need, at an hourly rate that doesn’t change based on your asset level.

That’s ideal if you want flexibility. If you don’t need comprehensive guidance, you can pay an advisor for a few meetings to check in on your retirement savings progress, figure out the best way to plan for college or get a workable budget in place. If you do want a full financial plan, you can still get that from an hourly advisor.

Typical charge: $200 to $400 an hour.

4. A flat fee per plan or service

If you’d rather not pay hourly but still want to pay for a specific service — say, a breakdown of how much money you’ll need for retirement and a strategy for accumulating that much — you may want an advisor who charges a flat fee.

You’ll get an outline of the services to be provided upfront, along with the fee you’ll pay for those services. What you won’t get is ongoing management or involvement from the advisor. If you don’t need that, this can be an inexpensive option. As with the hourly model, once the services are rendered, matters are in your hands. It’s up to you to carry that plan across the finish line.

Like an hourly rate, a flat-fee structure generally isn’t tied to your investable assets. That means you won’t face the barrier to entry that an AUM model might pose.

Typical charge: The cost for this will vary by the service provided, but you may pay between $1,000 and $3,000 for a financial plan.

5. A commission on investments sold

On the surface, commission-based advisors can appear to be the least expensive. They’re paid through commissions on the investments they recommend to you.

But while some commission-based advisors undoubtedly put your needs first, others are swayed by investments that pay the highest commission. And unlike when you’re buying a car, the commission for an investment bought or sold comes out of your pocket. A commission-based advisor may only be required to make sure an investment he or she recommends is suitable, which doesn’t necessarily mean it’s the best fit. This distinction is at the heart of the fiduciary rule.

Typical charge: Varies by investment, but mutual fund sales loads typically fall between 3% and 6% of your investment in the fund.

Why a financial advisor’s fee structure matters

Before you start working with an advisor, be sure you understand how he or she earns money, exactly how much you’ll pay for services and what those services entail. You need to be aware of a few terms related to how a financial advisor charges clients:

  • A fee-based advisor charges a fee but may also accept commissions from investments. Many advisors combine commissions with an AUM fee.
  • A fee-only advisor doesn’t earn any commissions from investments. He or she may still piece together more than one fee structure — for example, charging an AUM fee for investment management and a flat fee for financial planning — but commissions are off the table.
  • A commission-only advisor earns his or her income from commissions on the investments bought and sold on your behalf.

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