How much does a financial planner cost? Tariff structures, services

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  • According to AdvisoryHQ, the average cost for a financial planner is 0.59% to 1.18% of your assets.
  • However, not all planners charge for assets under management – they may charge fees or commissions.
  • A robo-advisor or online planning tool will cost less than a traditional in-person planner.

A financial planner is an expert, usually a CERTIFIED FINANCIAL PLANNER (CFP), who helps you create a financial plan to achieve various goals.

“They’ll really try to get to know the client they’re working with, try to get to know their goals, both short-term and long-term, as well as understand their risk tolerance,” says Maggie Gomez, CFP® professional and owner of Money with Maggie. . “Then they will help to invest their money in a way that achieves their goals in the most effective way.”

Although you can think of a financial planner as someone who helps you with your investments, their responsibilities go beyond looking at the stock market.

“Think, do I need help creating a budget? Do I need a plan for my student debt? Am I trying to buy my first home?” says Lauryn Williams, CFP® professional and founder of Worth Winning Financial Planning. A financial planner can help you create a strategy to achieve these goals.

The cost of a financial planner will depend on their services – for example, you may want a one-time meeting or ongoing financial planning sessions – and their fee structure.

How Financial Planner Fees Work

Not all financial planners have the same method of invoicing clients. Here are the types of fee structures you might encounter:

  • Assets Under Management (AUM): The planner charges a percentage of the assets it manages. For example, if they charge 0.25% per year and you have $100,000 in your IRAs, you would pay $250 for the year. If the planner has a tiered AUM structure, they will charge you a lower percentage the higher the value of your asset.
  • Paid only: A financial planner can charge a flat fee by the hour, month, or project. For example, you can pay $500 per hour to have a planner work with you once or twice. A planner might charge $1,500 for a project, no matter how long it takes. Another might charge $2,000 to $4,000 per year to work with you on an ongoing basis, depending on your needs.
  • Commissions: The planner earns a commission based on the investment products you buy, including mutual funds and annuities. They may also earn a commission if you purchase insurance policies through them. They might charge a stock commission, which is a fee each time they trade a stock for you. (Other planners might show you how to trade stocks so you don’t have to pay for them every time.)
  • Paying: The planner primarily earns money through fees, but a small portion is also earned through commissions.

How do you choose the fee structure that’s best for you? Gomez says if you’re busy and just want some guidance to get started, an hourly rate might be best. If you want an ongoing relationship with a planner, an annual fee or a percentage of the AUM might be fine.

It is also important to determine if you are comfortable with a commission structure.

“Commissions in and of themselves aren’t a bad thing – real estate agents make money that way, and it’s a common profession that people are okay with,” Williams says. “You just have to keep in mind that if you’re working with someone who charges commissions, there might be an innate conflict of interest, so they might not be choosing what’s in your best interest. because he feels motivated to sell in general, instead of doing what’s best for you as a customer.”

The cost of a financial planner does not only depend on their fee structure. It also depends on the type of scheduler you are using.

Average cost of an in-person financial planner

A traditional in-person financial planner typically manages your investments, but they also work with you on a financial plan that includes retirement planning, debt repayment, and insurance policies. You can meet them in person, but many will also work with you by phone or videoconference.

According to 2021 data from AdvisoryHQ, the average cost of a financial planner who charges based on AUM is 0.59% to 1.18%. AdvisoryHQ collected data from CFPs, wealth advisors and asset management companies. Here are the average percentages billed annually, based on assets under management:

Source: AdvisoryHQ

Average cost of a robo-advisor

A robo-advisor is an automated system that helps you create an investment portfolio. As the name suggests, it’s more of an advisor than a planner, but it can be useful for some people.

“A


robo-advisor

is a great way for someone who’s just starting out, doesn’t have a huge budget, wants to keep costs low, and really likes the set-it-and-forget-it method, says Gomez.

To find the average cost of a robo-advisor, we looked at 23 robo-advisors. Next, we split the costs into two categories: those that charged a percentage of your assets and those that charged a flat fee. For robo-advisors with more than one payment option, we’ve included each fee option as a separate data point.

According to our research, the average cost for a robo-advisor who charges per AUM is 0.40% per year. (Remember we included 111 data points, and 85 were from a single company that had multiple fee options.)

Among robo-advisors who charged a fixed fee, the average cost was $4.09 per month or $49.08 per year.

Average cost of online financial planning

Online financial planning is similar to robo-advising, but a bit more robust. You have some access to live experts and maybe you can talk via live chat or video chat.

The difference might seem confusing, so here’s an example: Fidelity Go is an automated platform that charges up to 0.35% per year. Fidelity’s personalized planning and advice is similar, but has added personalized advice from an expert and charges 0.50% per year. (And you still have the option of going the traditional in-person route with Fidelity Wealth Services.)

To examine the average cost of online financial planning, we looked at the same list of 23 robo-advisors. We narrowed down the list to 11 companies that offer online financial planning.

The average cost charged by companies using AUM is 0.53% per year. The average cost for those charging a fixed fee is $12.64 per month or $151.66 per year. This data does not include the one-time fee of $300 from Schwab Intelligent Portfolios Premium when you sign up.

Not everyone needs a financial planner

Generally, the more complicated your situation and the more assets you have, the more likely you are to benefit from a financial planner.

For example, you might want one if you want to invest and run a debt repayment strategy. But if you’ve just opened your first savings account and are working on building up your credit, you may not need professional financial help just yet.

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