In today’s uncertain times having a financial plan intact is more important than ever before. Let’s be honest, in today’s modern era we cannot even commit to a restaurant for dinner before a complete analysis of their menu and prices – let alone commit to someone as important as a financial advisor.
Working with a financial advisor cannot only provide a sense of stability for your future but also offers immense security. Think about it – you are thinking about retirement from your early 20 and spend the next 30 years saving for it. Working with a financial advisor will ensure that it’s not just you who is working hard.
What is fixed fee financial planning? Will you need a certified retirement advisor? Are financial advisors and planners really worth the hassle? Keep reading to find an answer to all your queries.
Financial Fee Structures
While it is true that not everyone is going to need a financial advisor, those who do acquire assistance need to understand the value of partnering with the right financial advisor who caters to your specific requirements. Especially when it comes to payment plans.
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The fees you pay your financial advisor should be a clear reflection of the service you are receiving. Furthermore, they should be:
- Easy to understand.
- Both parties should come to mutual pricing understanding in advance.
- And the terms of cancellation should not be complicated.
Most firms or advisors have a basic retainer or an hourly fee structure set. While others can charge you by individual plans or a fee structure called “assets under management” in which case they will charge a certain percentage of your portfolio.
Refer to the chart below for a better understanding.
| Fee Type | Typical Cost |
| Annual Retainer | $2,000 to $7,500 |
| Hourly Fee | $200 to $400 |
| Custom Plan Fee | $1,000 to $3,000 |
| Assets Under Management | Traditional advisors will charge roughly 1% of your portfolio, whereas, robo-advisors charge anywhere from 0.25% to 0.50%. |
Fees by the Service
Where in the past financial services were only provided by individuals – today there are a plethora of options when it comes to financial planning.
Traditional Advisors
When people generally think of financial advisors this is what comes to mind. A human interaction. This is the most sought out service when it comes to financial planning. As humans we want to put a face to someone who is making possible life impacting decisions for us.
Traditional advisors also offer the greatest variety when it comes to their fee structures.
AUM Fee
Traditional advisors understand that a bigger portfolio means a bigger return on investment for their services. Therefore, some won’t even take into consideration a portfolio that is less than $250,000.
- Cost: on average a traditional advisor will charge 1% of total assets managed for the client.
Annual or Monthly Retainer
A retainer is a fee that is not necessarily based on your assets but rather on the complexity of your investments.
- Cost: a retainer can vary anywhere from $2,000 to $7,500 per annum.
Hourly Charges
If your portfolio does not require too much attention or if you are looking for a simple one time input then this may be the best solution for you.
- Cost: a financial planner can charge anywhere from $200 to $400 per hour.
Fixed Fee Financial Planning
A financial advisor may charge you a time fee for financial planning assistance. However, the drawback that investors seem to find here is that there is no upkeep of the portfolio once it is created.
- Cost: the flat fee will vary based on the service performed, however, the typical range is anywhere from $1,000 to $3,000.
Commission
Sometimes investors decide to pay their financial planner through commission. The commission depends on the investments they suggest and the profit the client makes.
- Cost: again this varies however the median range is anywhere from 3% to 6%.
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Robo- Advisors
Due to being computer-based, there is minimum to no cost maintenance making it a smart solution for those beginning to build their investment portfolio. However, that doesn’t mean that a robo-advisor will not put in their share of work. Robo-advisors will work with you to help achieve your financial goals within your time frame.
- Cost: as mentioned above the fee for a robo-advisor can charge anywhere from 0.25% to 0.50%. Therefore if you have a portfolio of say $50,000 you would be paying about $125 to $250 per year.
Online Financial Planners
In the world of Covid-19 online financial planners offer the best of both worlds when it comes to financial planning. They capture the essence of robo-advisors by working online, however, they maintain the efforts of a traditional financial planner. Online financial planners can be done through various mediums such as phone or video. However when it comes to actual portfolio management that is maintained via a virtual system.
- Cost: it is difficult to work out an exact cost for an online financial planner, however research does indicate that on average the cost varies from 0.30% to 0.89%. This translates from a few hundred dollars to several thousand, all again based on the density of your portfolio.
Why Should a Financial Fee Structure Matter To You?
Depending on your financial portfolio is it imperative that you choose a fee structure that makes the most sense for you. If you are just starting to dip your hands into the land of investments then an AUM fee structure may not make sense. To get a better understanding of fee structures contact us at Fin Plan, where we have more than 25 years of financial planning experience. Furthermore, we have a clientele list that covers all spectrums of a portfolio – making us the ultimate choice for your financial needs.
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