Average Financial Advisor Costs | % of AUM, Average & Hourly

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Intro: How Much Do Financial Advisors Cost?

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Since we launched in 2015, AdvisoryHQ News has become one of the fastest-growing review and ranking site for financial advisors and wealth management firms.

We recently observed a high level of consumer interests in finding out the cost of a financial advisor.

Key questions frequently asked by consumers and investors include:

• How much do financial advisors cost?
• How much does it cost to hire a top investment management firm?
• What’s the average cost of fee-only financial advisors?
• What percentage do financial advisors charge to manage client assets?
• What do financial planners charge on an hourly basis for financial planning services?

This 2016 article on financial advisor costs has been published to help answer the above questions, and to present a comprehensive review of the cost structure for the financial advisory and investment industry.

Pricing Structures Used Across the Industry to Present Financial Advisor Costs

Image Source: BigStock

Before we continue, we would like to discuss the standard “Advisor Cost Structure” table used across the industry. Wealth management firms and financial planners often present their advisor and investment management costs to clients in the form of a cost structure table.

This cost structure is basically a comparison outline of what a firm would charge for its services and for managing assets for a client.

See the table below for an example of an investment management firm’s cost structure (comparison by invested amounts).

Image Source: AdvisoryHQ

Across the industry, financial advisors, planners, and registered investment management firms often post their asset management and financial advisor cost structures on their websites. If this information cannot be found online, you can request this information from the wealth management firm.

For registered investment advisors (RIAs), you can view their charges on their Form ADV. RIAs normally post a link to their Form ADV at the bottom of their homepage.

Different Financial Advisory Cost Rates

Before we dive deeper into answering the how much financial advisors cost, we’ll first need to quickly cover the various types of financial and investment charges. These are the various types of charges used by financial planners, advisors, and investment managers.

It is best to understand the different types of costs before contacting and using the services of a financial advisor or investment manager.

1. A Percentage of the Asset Being Managed (% of AUM): This type of cost is the most commonly used across the industry. It is as simple as giving your investment manager a particular sum of money to invest on your behalf, and in return, your investment manager charges a percentage of the asset under his or her management. For example, your financial advisor cost might be 1.10% of the amount your advisor manages on your behalf. In regards to the question “how much do financial advisors cost”, a 1.10% rate would cost you $5,500 in a particular year if your advisor managed $500,000 of assets on your behalf.

2. Percentage—Tiered Rate Structure: In general, financial advisors and RIAs would reduce their rate as the assets they manage on your behalf increases. A tiered percentage rate structure involves multiple rates and tiers. For example, an asset manager might charge 1.17% for managed assets of $200,000 or less, 1.05% for assets between $200,001 and $500,000, 0.96% for amounts between $500,001 and $750,000, and 0.92% for amounts greater than $750,000.

3. Fixed Financial Advisor Costs: This type of financial planner cost is very easy to understand. It involves a flat cost to you for using the services of a financial planner. For example, your financial planner cost might be $1,500 for simple financial plans and $3,500 for highly complex financial, tax and retirement strategies and planning.

4. Financial Advisor Cost per Hour: This is exactly what it means—when an advisor charges by the hour for services provided

5. Annual Retainer Cost: Financial planners sometimes charge an annual retainer cost. This cost is normally set at the beginning of the contract and specified on the terms sheet. The cost can change over time.

6. Hybrid Cost of a Financial Advisor: Oftentimes, financial advisors and investment managers utilize a mix of different costs structures for the various types of financial planning services and investment management functions they provide.

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Average Financial Advisor Costs

Click any of the links below to jump directly to the financial advisor cost that is of interest to you:

1. Average Percentage Costs (% of AUM)
2. Financial Advisor Costs (Tiered)
3. Average Flat Advisor Cost
4. Average hourly fees
5. Average annual fees/retainer
6. Hybrid fee structures

Our Methodology

What methodology did AdvisoryHQ use to identify and present this year’s costs of financial advisors, RIAs, and planners? Click here for a detailed review of our methodology: Methodology for Identifying the Average Cost of Financial Advisors.