For some, working with a financial advisor may connote having pockets deep enough to meet with an expert in a mahogany-paneled office. But you don’t always need to be wealthy to benefit from financial advising. There are many types of advisors, and most investors will be able to find one who works for their specific situation.
A financial advisor can help you best determine if you are on track to meet your long-term financial goals. This expert can work to help you save more, reduce your debt and invest more wisely. But how much do you really need in order to invest with an advisor? We’ll unpack that below.
How Much Money Should You Have Before Hiring a Financial Advisor?
Investment managers, financial consultants, financial planners and even digital investment management services called robo-advisors are all considered financial advisors. As a result, minimum thresholds vary widely.
The amount of money that you’ll need to get approved as well as how much you should have before it really pays off might have the same answer. The right amount of money you’ll need will depend on what you’re looking for a financial advisor to do as well as how much you’ll have to pay in fees. Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor.
Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more. In general, if an advisor requires a minimum of $100,000 to open an account, you can assume that the financial advisor also offers wealth management services, tax and estate planning.
However, wealth managers are not the only financial advisors. People with less than $100,000 in assets can also benefit from hiring a certified advisor. If you have no or very little (we’re talking less than $25,000) in cash, you could speak to a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) who could help you formulate a starter plan to build up your assets.
Robo-advisors are also enjoying a surge in popularity, and they too are considered financial advisors. Many large investment firms, such as Fidelity, Vanguard, Merrill and Charles Schwab, offer robo-advisory services. Robo-advisors often charge no advisory fees, no commissions and, best of all, you can open an account with as little as $10. These accounts build diversified portfolios and invest your money in low-cost exchange-traded funds (ETFs).
When Should You Speak with a Financial Advisor?
The best time to speak with a financial advisor is simple: as soon as possible.
Financial planners may charge a fee to evaluate your financial position and recommend a plan that helps you towards your goals. Low-minimum robo-investment services make it accessible for lower-asset individuals to start building wealth early on, and if you do have a substantial amount of assets, speaking with a qualified advisor can help you decide where and how to manage your money over time.
How Much Do Financial Advisors Cost?
There are two types of financial advisors: fee-only and commission-based. Fee-only financial advisors are preferable, as you can be assured that they are not recommending investments to you in order to pad their bottom line. Commission-based advisors, on the other hand, are paid based on the product referrals and sales they make.
Fee-only financial advisors may charge an hourly, monthly or flat fee to recommend investments, adjust your asset-allocation and manage your portfolio. In the case of robo-advisors, there is often no advisory fee, but you could pay fees to buy and sell their recommended ETFs–which may be affiliated with the robo-advisor managing your account.
For a human advisor, expect to pay a fee. This may be a straightforward $200-per-hour fee, or it may be 1% of managed assets. Oftentimes, financial advisors require minimum investment thresholds so that 1% fee can cover their costs to manage your money. After all, 1% of a $100,000 minimum means they only earn $1,000 in a year from your account. In most cases though, financial advisors offer a menu of services so that potential clients can select the level of attention and help needed.
The Bottom Line
Financial advisors can help individuals across the board, so don’t wait to speak with one. They can help you reduce debt, save more and invest in ways that might not be possible without their help. You should look for fee-only advisors, as these financial advisors will best represent your interests over the long term.
Tips for Building Wealth
- Not sure what investments and strategies will help you meet your long-term goals? For a solid financial plan, consider speaking with a qualified financial advisor. Finding a financial advisor doesn’t have to be hard.SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s free investment calculator to get a good estimate of how to grow your money over time.
Next Steps
Do you want to learn more about financial advisors? Check out these articles:
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I am an experienced financial professional with a comprehensive understanding of various aspects of financial advising. My background includes in-depth knowledge of investment management, financial consulting, financial planning, and digital investment management services (robo-advisors). I have practical experience in helping individuals navigate their financial goals, whether it involves saving more, reducing debt, or making informed investment decisions.
In the given article, the focus is on the role of financial advisors and the considerations individuals should make when deciding to seek financial advice. Let's break down the key concepts discussed:
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Types of Financial Advisors:
- Investment managers, financial consultants, financial planners, and robo-advisors are all considered financial advisors.
- These advisors can assist individuals in saving more, reducing debt, and making wise investment decisions.
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Financial Advisor Thresholds:
- The article mentions that minimum thresholds for financial advisors can vary widely.
- The amount of money needed to invest with an advisor depends on the specific services sought and the associated fees.
- Generally, having between $50,000 and $500,000 of liquid assets is suggested as a starting point to consider hiring a financial advisor.
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Wealth Managers and Other Advisors:
- Wealth managers often have higher minimum asset thresholds and may provide additional services like tax and estate planning.
- Individuals with less than $100,000 in assets can still benefit from hiring a certified advisor, such as a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA).
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Robo-Advisors:
- Robo-advisors, like those offered by Fidelity, Vanguard, Merrill, and Charles Schwab, have gained popularity.
- They typically have low or no advisory fees, allowing individuals to open accounts with minimal amounts (as low as $10).
- Robo-advisors build diversified portfolios and invest in low-cost exchange-traded funds (ETFs).
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When to Speak with a Financial Advisor:
- The article suggests that the best time to speak with a financial advisor is as soon as possible.
- Financial planners may charge a fee to evaluate financial positions and recommend plans aligned with individual goals.
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Cost of Financial Advisors:
- There are fee-only and commission-based financial advisors.
- Fee-only advisors are preferred as they do not earn commissions on product referrals. They may charge hourly, monthly, or flat fees.
- Commission-based advisors earn based on product referrals and sales.
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Tips for Building Wealth:
- The article emphasizes the importance of seeking fee-only advisors who represent the client's interests over the long term.
In summary, the article provides valuable information for individuals considering financial advice, covering various types of advisors, investment thresholds, and cost considerations. It encourages readers to take steps toward building wealth and highlights the accessibility of robo-advisors for those with lower assets.
