Some traditional financial advisors have minimum investment amounts they require to work with clients. These can range from $20,000 to $500,000 or even more. Why? Because their fees need to cover their time and expertise, and managing smaller portfolios may not be cost-effective for them.
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.
Around 60%, or the majority, of financial advisors with more than five years of experience will earn over $100,000 annually and up to $300,000. At the higher end, $300,000, puts the advisor in the top 10% of household income in the United States, which is not bad at all.
Advisors at wirehouses typically earn a base salary plus bonuses based on assets under management (AUM) growth and sales goals. Total pay packages generally range from $100k for junior advisors up to $300-500k for senior advisors managing over $100 million in AUM.
According to the U.S. Bureau of Labor Statistics, the median annual wage for personal financial advisors was $94,170 in May 2021. It means half of the financial advisors earned more than that, and half earned less. One in ten earned less than $47,570, while one in ten made more than $208,000.
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.
Hiring a financial advisor can seem like an unnecessary expense but they often save you money in the long run. If you choose to hire a financial advisor, make sure all their fees are transparent before you sign. A financial advisor is usually recommended when their fee is less than what they save for you.
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.
However, in general, it's wise to start working with a financial advisor or wealth management team once you've built a nest egg of $1M in investable assets.
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.
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.
Note: Your advisor will not have any access to your bank account information or security questions, nor would they have the ability to transact on your behalf.
Unregistered Advisor: An advisor not registered with FINRA or the SEC is a major red flag and warrants a conversation. Lack of Contact: If you have not heard from your advisor in three years or more, it's a sign of neglect. If they don't answer their phone or respond to emails, it's time to look elsewhere.
Be sure to keep your financial advisor updated on any potential changes at work (especially if you plan to make any career changes), how you feel about your chances for promotion at your job, if your employer-provided benefits may be changing, what you would do if you lost your job, etc.
Having a disqualifying criminal conviction
Some examples of crimes that might be disqualifying for a financial planner include: Theft. Fraud. Embezzlement.
In our professional experience, achieving an annual income of $300,000 is a realistic target for financial advisors, particularly when leveraging a combination of fee structures, effective AUM growth strategies, and commission-based earnings.
In addition, millionaires are much more likely to work with a financial advisor (69%), more than double the amount of the general population (33%).
The "Big 4" refers to the four largest accounting firms and includes Deloitte, PwC, KPMG, and EY. All four companies provide audit, assurance, consulting, financial advisory, risk management, and tax compliance services. Deloitte. "Deloitte Ranked 6th on World's Best Workplaces 2023."