While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.
A 1% annual fee on a multi-million-dollar investment portfolio is roughly typical of the fees charged by many financial advisors. But that's not inherently a good or bad thing, but rather should hold weight in your decision about whether to use an advisor's services.
Lastly, some advisors charge by the hour, similar to how a lawyer might bill you. This could be a good choice if you only need occasional advice or specific questions answered rather than ongoing management. Hourly rates for financial advisors typically range from $200 to $400 per hour.
Look for financial planners who are fiduciaries, which means they have a legal duty to look out for your best interests. "If a 'financial planner' offers the same advice or products without tailoring their recommendations to your individual goals, that's a red flag," says Lawrence.
They Put Their Interests Before Yours
Are they recommending products that pad their bottom line while possibly not being the best product for you? You need to ask questions, understand how your advisor is compensated, and be clear on whether this results in conflicts of interest.
Industry standards show that financial advisor fees generally range between 0.5% and 1.5% of AUM annually. Placement of a 2% fee may appear steep compared to this average. However, this fee might encompass more comprehensive services or cater to more unique, high-maintenance portfolios.
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.
At Schwab, there's no cost to work with your Financial Consultant. ² There's no cost whether you're getting assistance in creating your personalized plan, or receiving tailored product recommendations and direct access to our specialists.
Very generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could also be higher, such as $500,000, $1 million or even more.
Typical AUM Fee Structures Include Breakpoints
1% of assets under management per year. This is a common fee for accounts under $1 million. 0.75% of AUM for accounts between $1-5 million. As assets grow, the percentage fee often decreases.
In addition, millionaires are much more likely to work with a financial advisor (69%), more than double the amount of the general population (33%).
By hiring a single investment advisor, you receive more streamlined advice as only one person manages all your money matters removing any chance of conflicting advice or any disagreement. This also allows the chosen individual to clear up your doubts and offer guidance to you on how to best attain your financial goals.
Financial advisor fees may be negotiable. Whether you're able to get fees reduced can depend on which advisor or firm you're working with. If an advisor is willing to negotiate fees, they must specify that in their Form ADV.
Source: 2021 Fidelity Investor Insights Study. Furthermore, industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated.
Bottom Line. On average, financial advisors charge between 0.59% and 1.18% of assets under management for their asset management. At 1%, an advisor's fee is well within the industry average. Whether that fee is too much or just right depends entirely on what you think of the advisor's services and performance.
Financial service providers regard a HNW client as someone with at least $1 million in liquid – or investable – financial assets. Clients with assets between $5 and $30 million are considered VHNW, while UHNW clients have assets greater than $30 million.
Edward Jones serves as an investment advice fiduciary at the plan level and provides educational services at both the plan and participant levels, if applicable.
Hiring a financial advisor isn't always a necessity, but not working with one could lead to missed opportunities, or even regrets. If you lack the expertise or knowledge to navigate financial decisions effectively, a financial advisor can make a significant difference in helping you achieve your desired returns.
Robo-advisors are typically the least expensive, followed by online financial planners. An in-person advisor will be the most expensive and may charge you more than 1 percent of your assets annually.
An annuity is essentially an insurance product. Insurance agents, financial advisors, and brokers who work on commission often sell them as a retirement tool. Their claim to fame is the promise of stability – a stable income stream that is partially or wholly insulated from market movements.
You should meet with your advisor at least once a year to reassess basics like budget, taxes and investment performance. This is the time to discuss whether you feel you are on the right track, and if there is something you could be doing better to increase your net worth in the coming 12 months.