How Much Does a Financial Planner Cost? A common question for many advice seekers, but the answer is very uncommon and varies depending on what you would like to achieve. 

As a certified financial planner with expertise in serving clients across the wealth horizon, I have been given the opportunity to understand the various methods in which financial advisors and financial planners cost. I understand the importance of finding the right financial planner to help manage your wealth and achieve your financial goals. 

The following areas contribute to a financial planners cost:

• services provided, 
• advisor’s credentials, 
• and the complexity of your financial situation. 

In this insight, we’ll discuss the different fee structures, average costs, and factors to consider when hiring a financial planner.

Understanding Financial Advisor Fee Structures

Financial advisors and Planners can use a variety of fee structures, each with its own advantages and disadvantages. It’s crucial to understand these structures to ensure you’re getting the best value for your money.

During my early days of investing I experienced the uncertainty of what I would be paying an advisor for and for how much. Let’s discuss AUM (assets under management) fees next. 

Also, I wrote about this on the website and it is available here: Truth Behind Financial Advisor Fee Structures Revealing The Importance of Hourly and Fee Only Models.

Assets Under Management (AUM) Fees

The most common fee structure for traditional financial advisors is the Assets Under Management (AUM) model. In this approach, the advisor charges a percentage of the total assets they manage on your behalf, typically ranging from 0.5% to 2% annually. 

The percentage often decreases as the size of your assets increases. This model aligns the advisor’s interests with your own, as their compensation is directly tied to the growth of your portfolio.

It’s important to note that the AUM fee may decrease as the size of your assets increases, as many firms offer discounted rates for larger portfolios. And the reverse is possible for smaller portfolios.

The Hidden Truth of the AUM Fees in Financial Planner Cost

Some advisors usually charge more for smaller portfolios that’s not in their ideal assets category. Additionally, some firms may have minimum asset requirements, typically ranging from $500,000 to $1 million or more, before they will take on a new client.

For high net worth individuals, wealth management firms often use an AUM model, providing a comprehensive suite of services, including investment management, tax optimization, and estate planning. The fees for these services typically fall within the 0.85% to 2.0% range not including investment fees and other commissions. 

Average Assets Under Management (AUM) Fees

Research has shown that the average AUM fee that clients are paying is 1% of assets under management. Let’s consider a $2 million dollar portfolio. 

For a $2 million portfolio, the annual fees would be $20,000, not including any investment related fees that are charged by the funds or investments that’s purchased on the clients behalf. 

At a recent meeting with various professionals I spoke with a financial advisor, and the conversation turned to fees and what each other’s fee structure is, and if we required a minimum investable assets at my firm. My answer was simple “I charge a flat fee for all in financial planning”.

The Advisor Response to how much does a financial advisor cost 

The advisor mentioned that the higher the assets they manage the lower the fee would be at a .85% floor annual assets under management fee. This .85% AUM fee was for asset values of $2,000,000 and up. However, for someone with $500K their fee would most likely be between 1.5% and 2%.

The advisor mentioned that I (the flat fee financial planner) provide a better overall value and cost for clients. However, in their opinion it’s a harder sell because the person is paying the fee out of pocket, and the fee is not concealed like within the AUM model.

Allow me to explain. When a client pays an AUM fee the fee is normally deducted from the investment assets, and clients are unaware of the fee.

Although AUM advisors are required to disclose their fee, and clients have the ability to review their fees on their statements, many clients do not review the fees they are paying within AUM.

Resulting is fees being out of sight out of mind to the client. On the other hand, clients that pay a flat fee know exactly what they are paying, and what services they are receiving. 

No AUM Requirement At A Small Investment

My clients do not have to be concerned about AUM and if they are getting the “best AUM rate”, because my firm operates on a flat fee or hourly basis only.

Flat or Retainer Fees

This fee structure is often used for comprehensive financial planning, where the advisor creates a detailed plan covering various aspects of your financial life, such as retirement planning, tax strategies, and risk management. 

The flat fee may also include ongoing support and plan updates. Or ongoing fees can be billed and charged on a monthly or quarterly basis.

Flat and Retainer Fee at A Small Investment, LLC

Example of a Flat Fee and Retainer Fee Financial Planner Cost  

For example, my comprehensive financial planning service has a $3000 flat fee. No surprises, commissions, or hidden costs. 

At this cost I would collaborate with the client for 3 months to get their financial house in order. Following the three months the client and I have the option to incorporate a retainer fee for ongoing financial planning. 

Example of Retainer Fee Financial Planner Cost  

The ongoing financial planning would be for a monthly fee that covers the additional follow up, advice, and recommendations that align to the clients goals and values. This fee would be dependent on complexity and will not be more than $777.78. 

Although my fees may change in the future, I always post and provide transparent fee communication. To see my updated fees you can view that on the pricing page and on my SEC ADV.  

Both pages are kept up to date with my current financial planner cost. 

Average Flat Fees

For comprehensive financial planning services, you can expect to pay a flat fee ranging from $1,000 to $3,000 or more per year. This fee structure is often used by financial planners who provide a wide range of services, including investment management, tax planning, estate planning, and risk management.

The exact cost will depend on the complexity of your financial situation, the number of services provided, and the planner’s level of expertise. Individuals, family’s, and business owners with more complex financial needs may pay towards the higher end of this range.

Average Retainer Fees For On Going Financial Planning

Although ongoing financial planner cost (fees) can be different across the industry in many ways. The one thing that remains the same is the cost for service.

This means no matter what the planner is providing the ongoing fee would be paid monthly, quarterly, or sometimes semi annually. 

The Retainer Fee Difference for financial planner cost

There are two main distinctions in retainer fees for fee only advisory services. One is the retainer fee is deducted directly from an investment account.

You may think this is similar to the AUM fee, because the fee is taken from the investment account. In the way that the AUM fee is taken out of the investment account in the AUM fee agreement, and you would be correct. 

However, the difference is the set fee approach of the retainer model would mean that the fee would be charged no matter what happens to the investment portfolio. Therefore, if the market is up or down for the quarter the fee would be the same.

Now contrast this with the retainer fee being paid directly to the planner from whatever source the client chooses gives the client and the financial planner the best option for fee for service. This would mean that the client pays as they wish and the financial planner assists in the best options for payment as they consider their overall financial situation. 

Hourly Fees in Financial Planner Cost

Now, let’s discuss the hourly rate further. Financial planners may also charge an hourly rate, typically ranging from $200 to $400 per hour. This model is often used for specific, one time projects, such as creating a comprehensive financial plan or providing a portfolio review. 

Hourly fees can be a good option for high net worth individuals who only need occasional guidance or have a relatively straightforward financial situation.

Benefits to You of Hourly Financial Planning

• Receive a diversified investment strategy aligned to your values and goals.
• Uncover areas of your cash flow that can assist in your money goals.
• Know exactly what home affordability looks like in your situation with a plan to achieve.
• A plan to Manage debt or completely eliminate the debt.
• A retirement saving plan and an after retirement distribution plan that not only minimizes taxes now but in retirement as well. 
• Understand what education cost will be, and a plan to save for that cost.
• Tax minimization strategies, with near and long term net positive impacts to your money.
• All in review of your insurance including health, life, property and casualty. With recommendations on what’s best for your situation.
• Create an estate plan that aligns to your values and goals; while keeping top of mind the tax, and long term impact of the wealth on your future.  
• And many other areas of hourly financial planner cost.

Example of Hourly Financial Planner Cost

Typically I base my hourly fee on the time it takes to review, produce, and/or provide a solution for your financial need. Before I begin any work on an hourly request; I always provide an hourly cost before starting any research or task related to your request.

Therefore, you will always know exactly what your hourly financial planner cost will be. For example, using one of the benefits mentioned above, understanding what education cost will be, and a plan to save for that cost.

I would charge an hourly fee of $250 per child (or student) that would need the analysis completed for their future education cost.  What you would receive is a detailed analysis of what the college cost will be, and plan on exactly how much you will need to have saved each month to achieve the education funding goal. 

Commission based Fees

While less common for high net worth clients, some financial advisors may earn commissions on the financial products they sell, such as insurance policies or investment products. This fee structure can create potential conflicts of interest, as the advisor may be incentivized to recommend products that generate the highest commissions rather than those that are truly in the client’s best interest. 

My firm does not charge any commissions, and the firm is not fee based. The service model only provides services to clients on a flat fee, fee only basis.

In some situations, my service model and the potential clients need are not the best fit. As a fiduciary, I always recommend fee-only or fee-based advisors who are legally obligated to act in the client’s best interest.

Average Commission Fees

While less common for high net worth clients, some financial advisors may earn commissions on the financial products they sell, such as insurance policies or investment products. Commissions can range from 3% to 7% of the investment amount. 

As mentioned earlier, I recommend working with fee-only or fee-based advisors who are legally obligated to act in your best interest. The commission on products and services are not standard across the industry and I have been hired by clients that pay these commissions to review their situation and provide my recommendations and/or suggestions.

Factors to Consider When Hiring a Financial Planner

When selecting a financial planner, it’s essential to consider several factors beyond just the cost. Here are some key considerations:

Credentials and Certifications

Look for financial planners who hold prestigious certifications, such as the Certified Financial Planner (CFP) designation. CFPs are required to meet rigorous educational, experience, and ethical standards, ensuring they have the expertise to provide comprehensive financial planning services.

Other relevant certifications include the Chartered Financial Consultant (ChFC) and the Certified Investment Management Analyst (CIMA). These designations demonstrate the planner’s specialized knowledge and commitment to professional development.

Fiduciary Duty

Ensure that the financial planner you choose is a fiduciary, meaning they are legally obligated to act in your best interest. Fiduciaries are required to disclose any potential conflicts of interest and provide recommendations that prioritize your financial well being over their own.

And do not just take the advisor’s word for it when they say they are a fiduciary, check their actions and recommendations versus what you would actually like to achieve. 

Services Offered

Consider the range of services the financial planner provides. High net worth individuals often require a comprehensive suite of services, including investment management, tax planning, estate planning, risk management, and more. 

Look for a planner who can address all aspects of your financial life. In this way you know that they are considering everything that relates to you and your money. 

Experience and Specialization

Seek out financial planners with extensive experience working with high net worth clients. They should have a deep understanding of the unique financial challenges and opportunities faced by individuals in your wealth bracket. 

Additionally, look for planners who specialize in areas that are relevant to your specific needs, such as business succession planning or charitable giving.

Communication and Accessibility

Effective communication and accessibility are crucial when working with a financial planner cost. Ensure that the planner is responsive, transparent, and willing to explain complex financial concepts in a way that you can understand. 

Additionally, consider the planner’s availability and whether they can provide the level of personalized attention you require.

What’s Next – In How Much Does a Financial Planner Cost

Selecting the right financial planner cost is a critical decision for you. By understanding the various fee structures, average costs, and key factors to consider, you can find a financial planner who aligns with your financial goals, risk tolerance, and overall wealth management needs.

Remember, the cost of a financial planner should be viewed as an investment in your financial well-being and future. A skilled and experienced planner can help you navigate the complexities of wealth management, optimize your tax strategies, and develop a comprehensive plan to achieve your long-term financial objectives.

If you are seeking personalized financial guidance, I encourage you to explore your options and find a financial planner who can provide the expertise, services, and value you deserve. By working with the right advisor, you can have confidence in your financial future and focus on the things that matter most to you.

Now what’s next for you?