Financial advisors charge in a few common ways. Knowing which one an advisor uses tells you what you'll pay and whether they have any reason to recommend one product over another.
The four common fee models
| Model | How it works | Typical range |
|---|---|---|
| Percentage of assets | A yearly fee based on the money the advisor manages, billed quarterly. | Often around 1% a year, usually lower on larger balances |
| Flat annual fee | A set yearly price for planning and advice, whatever your balance. | Commonly a few thousand dollars a year |
| Hourly | You pay for the time you use, often for a one-time plan or second opinion. | Commonly $150 to $400 an hour |
| Commissions | The advisor is paid by the company whose product you buy, such as an annuity or insurance policy. | Built into the product's price |
These ranges are general and vary widely. Always ask an advisor for their exact fees in writing.
Fee-only vs. fee-based
The names sound alike but mean different things. A fee-only advisor is paid only by you and earns no commissions. A fee-based advisor charges you a fee and may also earn commissions on products they sell. Fee-only advisors have fewer conflicts of interest, though many fee-based advisors also serve clients well.
What 1% really costs
On a $500,000 portfolio, a 1% fee is $5,000 a year. Over decades that adds up, so it's worth asking what you get for it. Good advisors include financial planning, tax strategy, and ongoing advice, not just picking investments.
How to compare advisors
- Ask how they're paid, and by whom.
- Get the total yearly cost in dollars, not just a percentage.
- Read their Form ADV Part 2, which lists fees and conflicts. It's free on the SEC's adviser search site.
- Compare what's included: planning, tax help, and how often you'll meet.
When we match you, your advisor will walk you through exactly how they're paid before you commit to anything.