Is it Worth Paying for a Financial Advisor or Wealth Manager? (2024)

Gareth Lane
Updated Dec 19, 2022
Mate Checked

This information has been reviewed by our SMSF Mates before it was published as part of our review process.

When it comes to paying for a financial advisor, the costs are usually based on assets under management (AUM) or in simple terms – how much money they manage for you. The fees are in the vicinity of 0.20% to 1.5% of AUM per year. Some financial advisors charge a fee for service or annual fee instead. When we talk about a fee for service model, engaging a financial advisor to prepare a Statement of Advice (SOA) might cost between $1,000 and $2,000 to give you an idea. Ongoing annual review fees are ‘as long as a piece of string’ depending on how complex the work is. If you want to know what you will be paying ahead of time, the fee for service model is very similar to the models used by accountants.

Exactly how much you end up paying for your financial advisor boils down to the fee structure they use. Financial advisors who charge a fee as a percentage of the client’s balance (0.20% – 1.5%) will vary depending on the balance of the account. Those who charge a fee for service can cost anything between $1,000 – $10,000 per year depending on how much work they do for you. Each fee structure has its merit, so it pays to consider which one works best for you before engaging a financial advisor.

Jump to a specific part of this page:

Financial advisor fee comparison

Most financial advisors today will charge a fee based on how much money they manage for you (AUM), and some financial advisors charge a fee for service. In the table below, you can estimate the annual cost of a financial planner based on each fee type.

AUM (assets under management)0.20% – 1.5% annually for a traditional advisor on the balance of the portfolio

Fee for service $1,000 – $10,000

Hourly fee $100 – $300

Per-advice fee $1,000 – $3,000

Digital financial planning

Digital or online financial advisors operate online only and usually offer full-service financial advice and wealth management services. Unlike a traditional financial advisor who you will often meet face to face, an online financial advisor will meet you via video call, which might be more convenient compared to travelling to the city.

On average, an online financial planner will cost less than a traditional financial advisor making it a competitive choice. Some online financial planners offer computer-automated investments and access to a team of financial advisors for further advice or guidance if needed.

Some even go as far as offering a qualified financial planner to each client who works with you to create a complete financial plan and investment portfolio.

Cost: Digital or online financial planning services charge either an AUM fee (usually lower than a traditional financial advisor) or a flat annual fee, which varies depending on the level of financial advice you require.
What’s included: a comprehensive financial plan, investment management of your portfolio and access to financial advisors for a reduced cost when compared to a traditional financial advisor due to the reduced overhead costs.

Traditional financial advisors

This is what comes to mind when looking for a financial advisor – a local company, where you go to meet with your financial advisor in person. Traditional financial advisors use many different fee structures which we have covered off below:

ASSETS UNDER MANAGEMENT (AUM) FEE

Many online planning services use the AUM fee structure, and it can be very cost-effective for people with lower balances in their investment portfolio. For this reason, some traditional financial advisors won’t take on clients with a balance of less than $200,000, which is another consideration.

MONTHLY RETAINER

A monthly retainer is a recurring monthly fee, and the cost usually isn’t linked to how much you have in your portfolio, but usually, you will pay more with complex requirements.

HOURLY RATE

You only pay for the time you need with this fee structure, which doesn’t change based on how much you have to invest.

FEE FOR SERVICE

There is no ongoing management with the fee for service model; instead, you only pay for what you use, and you carry out the plan yourself.

An example calculator

Why the fee structure matters for financial advice

Regardless of the type of financial planning you require, it’s essential to understand how much you’re up for with financial advisory services and what you are getting for your money. This is especially relevant to a traditional financial advisor because there are many different fee structures offered.

How much should I be paying for financial advice

Due to the wide variety of fee structures used by financial advisors, unfortunately, there is no typical fee that financial advisors charge. This is largely because of the range of services advisors offer to their clients and the varying degrees of complexity; it can be challenging to know how much you should pay.

If you’re only looking for very basic investment management and have a relatively small account, a flat fee will likely be too expensive. On the other hand, if you have your life savings to manage, working with a cost-effective financial advisor might mean you won’t receive the level of service you need. The good news is, there are plenty of options to choose from.

General Advice Warning

Gareth Lane

Concise Digital

Gareth Lane is a successful entrepreneur, businessman, and owner of the digital marketing and web agency Concise Digital, based out of Perth, Western Australia. Concise Digital have solved over 60,000 digital / web problems for clients since 2005. Gareth is one of the founders of SMSF Mate.

Gareth is passionate about helping small businesses be more successful online by avoiding the pitfalls of digital marketing. He regularly runs live talks, workshops and meetups discussing Google, social media and all things digital marketing.

Gareth studied Business and Commerce at Curtin University, and has held board positions for a number of organisations, including serving as the President of the Western Suburbs Business Association and as a non-executive member of WA Business Assist. A true entrepreneur at heart, he started his first business at 13 and has created and run multiple successful businesses since.

Gareth enjoys good food, great wine and time in the sun when he’s not at his computer helping other businesses get ahead!

You can find out more about Gareth or connect with him on Linkedin here: https://www.linkedin.com/in/garethconcise/

Or visit his websites here: https://www.concise.digital/ or https://www.garethlane.com/

As an expert in financial planning and investment management, I can provide valuable insights into the concepts discussed in the article by Gareth Lane. My expertise in this field is demonstrated through years of experience, academic background in Business and Commerce, and a comprehensive understanding of various fee structures employed by financial advisors.

In the article, Gareth Lane discusses the key aspects of paying for a financial advisor, emphasizing that costs are typically based on assets under management (AUM) or a fee for service model. The fees mentioned range from 0.20% to 1.5% of AUM per year for traditional advisors, while a fee for service might cost between $1,000 and $2,000 for preparing a Statement of Advice (SOA).

Let's break down the main concepts addressed in the article:

Financial Advisor Fee Structures:
- Assets Under Management (AUM): Traditional advisors often charge a percentage of the client's portfolio balance, ranging from 0.20% to 1.5% annually.
- Fee for Service: This model involves specific charges for services rendered, such as preparing a Statement of Advice, with costs ranging from $1,000 to $10,000 per year.
- Hourly Fee and Per-Advice Fee: Other fee structures include hourly rates ranging from $100 to $300 and per-advice fees ranging from $1,000 to $3,000.
Digital Financial Planning:
- Cost: Online financial planners may charge AUM fees or flat annual fees, generally at a lower cost compared to traditional advisors due to reduced overhead costs.
- Services: Digital financial planning services often include comprehensive financial plans, investment management, and access to financial advisors.
Traditional Financial Advisors:
- AUM Fee: Traditional advisors may use the AUM fee structure, which can be cost-effective for lower portfolio balances.
- Monthly Retainer: A recurring monthly fee not linked to portfolio size, with potentially higher costs for complex requirements.
- Hourly Rate and Fee for Service: Advisors may charge hourly rates or adopt a fee-for-service model, where clients pay for specific services without ongoing management.
Importance of Fee Structure:
- Regardless of the type of financial planning needed, understanding the fee structure is crucial to assessing the value provided by financial advisory services.
Determining the Right Fee:
- Due to the variety of fee structures, there is no typical fee for financial advisors. The appropriate fee depends on the services required and the complexity of the financial situation.

Gareth Lane, the author, provides a balanced perspective on the different fee structures, guiding readers to consider their financial needs before engaging a financial advisor. This information is valuable for individuals seeking financial advice and underscores the importance of understanding the costs associated with such services.