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This Is How Much It Costs to Work With a Financial Advisor

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SmartAsset is a personal finance technology company that features a financial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe of Financial Advisors.

As you strive to reach your financial goals and prepare for retirement, you may consider turning to a financial advisor. 

A 2019 Northwestern Mutual study found that U.S. adults who work with a financial advisor report “substantially greater financial security, confidence and clarity than those who go it alone.”

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests average additional investment returns can range from 1.5% to 4% more each year. 

SmartAsset’s new tool makes it easy to find the right financial advisor near you in just a few minutes. Our exclusive, no-cost tool matches you with up to three local fiduciary financial advisors that have passed a rigorous screening process. We confirm each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

But you may be wondering: How much does a financial advisor actually cost? 

5 Ways Financial Advisors Are Paid

Generally, financial advisors charge a flat fee of $1,500 to $2,500 for the one-time creation of a full financial plan, or 1% to 2% of assets under management for ongoing portfolio management. However, fee rates and compensation structures differ between advisors. 

There are five main ways registered investment advisors charge for their investment advisory services:

  1. Percentage of assets under management: A percent of the total assets in your account; this percentage may vary based on the amount of assets under management

  2. Hourly charges: A rate charged per hour, typically for a special project or consulting

  3. Fixed fees: A set amount paid for a service, such as creating a financial plan

  4. Commissions: Additional compensation earned when a purchase or trade is made

  5. Performance-based fees: An additional fee charged if a defined benchmark is outperformed

Advisors may charge one of these fees or a combination. Fee-only advisors only earn money from fees paid by their clients. They don’t earn commissions from selling products or trading securities in their clients’ portfolios. Fee-based advisors earn money both from fees clients pay as well as commissions and other forms of third-party compensation.

How Much Do Financial Advisor Fees Typically Cost?

Most firms charge fees based on a percentage of assets under management for ongoing portfolio management. According to a 2019 AdvisoryHQ study, the average financial advisor cost is 1.02% of AUM for a $1 million account, which would amount to about $10,200 per year. 

Asset-based fees may decrease as the account amount increases, ensuring high-net-worth individuals are still paying a fair rate. However, this also means fees will be higher for those with lower account values. The average AUM fee for a $50,000 account is 1.18%, or $590 a year.

Fixed fees and hourly fees typically apply to financial planning or consulting services, as well as special projects. Fixed fees typically range from $1,000 to $3,000. Average hourly fees can be anywhere from $100 to $400 an hour, depending on the advisor and the complexity of the project.

The financial advisor cost might not be all you pay in the scenario if you open an account with a financial advisor. In addition to paying the advisor, you’ll may also be responsible for third-party fees and other costs. For instance, if a financial advisor uses mutual funds or exchange-traded funds (ETFs) in your account, you’ll have to pay costs associated with those funds in addition to the fee you pay your advisor.

Before you agree to work with an advisor, make sure you understand the advisor’s fee structure and what services that fee includes. If any advisors give a roundabout or elusive answer, steer clear. It’s a red flag if an advisor tells you not to worry about costs.

How to Find the Right Financial Advisor for You

As previously mentioned, research suggests that average additional investment returns can range from 1.5% to 4% each year when working with a financial advisor, which could help justify the cost for their services.

Additional research indicates 90% of Americans say nothing makes them happier than when their finances are in order. More importantly, 71% who use a financial advisor are happy with their life, compared with 50% who don’t use one.

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one. 

Our no-cost tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.

Follow These Steps to Get Matched With the Right Advisor for You

1. Simply enter your ZIP code below.

2. After you enter your ZIP code and answer questions about your financial goals, you can compare up to three top advisors local to you and decide which to work with.

3. Enjoy a better financial future!

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