How much does a financial planner cost?
A financial planner can cost anywhere from a few hundred dollars to hundreds of thousands or even millions of dollars. It entirely depends on the type of services being offered and how their fee structure works. A financial planner will either charge an AUM fee, flat annual fee, hourly fee, or per-plan fee. AUM fees are usually 1% to 2% of your assets under management, annual fees can range from $2,000 to $8,000 per year, hourly fees, can cost $200 to $500 per hour, and a per-plan fee is usually $1,000 to $3,000.
And if you’re interested in a zero-fee financial planner, Carry offers a personalized financial plan and the ability to ask your advisor unlimited questions 24/7 for no extra cost. Your financial planning services are all included with your Carry membership.
A financial planner assesses your current financial situation, and helps you to build a short-term and long-term plan to reach your financial goals. Whether you want to get out of debt quickly, be able to afford a house, or retire early, a financial planner can help you build an effective game plan.
Many people mistakenly believe that financial planners are only for high net-worth individuals. And that’s partly true. Financial planners are best known for helping the wealthy with rich people things like investment management, tax planning, and estate planning. However, financial planners are not out of reach for most people. If you need a professional to help you set you on the right track and hit your financial goals faster, it may be a good time to start looking for a financial planner.
And if you’re wondering how much they cost, here’s everything you need to know about how much financial planners charge, how their fee structure works, and if it makes sense for your specific situation. At the end, we’ll also go through some cost-effective alternatives.
Fee structure
Financial advisors have different fee structures based on the services that they offer. Most charge based on a percentage of your assets under management (AUM), while others may charge a flat fee per hour, per year, or per plan.
- Assets under management (AUM) fees – usually 1% to 2% of AUM.
- Flat annual fee (retainer) – usually $2,000 to $8,000 per year.
- Hourly fee – usually $200 to $500 per hour.
- Per-plan fee – usually $1,000 to $3,000 per plan.
The fee structure used is different for each advisor and will typically depend on what kind of financial planning services you’re getting. Your financial planner should tell you upfront which method they’ll be using to charge for their services, and what the estimated costs to you will be.
Let’s take a deeper look at the different fee structures and the expected fees based on your situation.
Assets under management (AUM)
When human financial planners charge fees based on the amount of money they’re managing for you, it’s referred to as AUM fees, which typically ranges between 1% to 2% annually. If you’re using a robo-advisor, AUM fees are usually under 1% (between 0.25% to 0.50% annually).
For example, if a financial advisor manages $1 million for you and charges a 1% fee, you’ll have to pay them $10,000 annually. AUM fee structures usually come with free additional services that you would normally have to pay for like a financial plan.
Financial advisors who charge an AUM fee will often offer a tiered structure on their fees by charging their standard rate up to a certain amount, and then a lower percentage for everything after that. For example, they might charge you their standard rate of 1% or 2% on the first $250,000, and 0.8% on the rest. As a result, you usually end up paying lower fees when your portfolio performs well and produces larger returns.
Robo-advisor AUM fees
With a robo-advisor, a computer algorithm will build and manage your portfolio for you based on your goals and risk tolerance. Because the amount of human work involved is minimal, the fees are lower than a traditional human financial advisor at under 1%. The typically robo-advisor charges anywhere between 0.25% to 0.50% AUM.
Hourly fees
Some planners may bill you hourly if it doesn’t make sense to charge you an AUM fee. Again, the pricing structure depends on the type of services (and to what extent) you’re being offered. Hourly fees can range anywhere between $200 to $500 per hour, with some higher-end wealth planners charging more.
Per-plan fee
A per-plan fee is what you’ll be charged if all you’re looking for is a one-off financial plan. There’s no on-going management or consulting services offered, and you just pay for the plan once. The plan will typically come with an assessment of your financial situation and guidance on how to best reach your financial goals.
For example, a financial plan might give guidance on which savings or retirement accounts to prioritize, how much to save each month, and where you should be investing your money.
A financial plan typically costs between $1,000 to $3,000.
What is the average fee for a financial planner?
With financial planning, there is no “average” since the costs can differ greatly depending on the type of services you’re being offered, the fee structure, and what amount of capital is being managed by the planner.
For example, a 1% AUM fee on $10 million of assets under management would be $100,000 per year, but only $1,000 per year if you only have $100,000 under management.
Delivery and complexity
One other thing to keep in mind is that how your services are delivered, and the complexity of your case will play a major factor in how much you’ll have to pay. For example, with delivery, you’ll often pay a lower rate if you only get consulting over the phone or through email versus meeting them in person.
How to save on financial planner costs
If you’re considering hiring a financial planner but want to save on fees, here are a few ways you can cut costs.
Use a robo-advisor: A human advisor that deals with high net-worth individuals will typically have the highest fees. A robo-advisor is mostly automated and will use algorithms to build you an investment portfolio based on your risk profile and financial goals. The typical AUM fee for robo-advisors is 0.25% to 0.50% AUM (Carry’s robo-advisor comes with ZERO fees). The downside of a robo-advisor is that they can’t help with more complex things like estate planning or advanced hacks to reduce your taxes.
Get advice from your bank: If your situation is not so complex and you only need answers to basic questions, you’ll oftentimes be able to get free financial advice from your bank. The downside is that this advice may come with recommendations for their own financial products and services and may not fully have your best interest at heart.
A financial planner with zero fees
Use Carry’s financial planning services
When you join Carry’s Professional Plan, you get 24/7 access to your very own financial planner fully included with your plan. You get the luxury of professional financial advice when you need it for ZERO AUM fees. In addition, you’ll also get a personalized financial plan built by your planner that gives you an actionable overview and blueprint on how to reach your financial goals. And if your situation ever changes, you can request a new financial to be made for you.
A financial plan typically costs around $1,000 to $3,000 as a one-off payment when you work with an outside financial planner. With Carry, it’s all inclusive with your membership — zero AUM fees, no hourly fees, and no per-plan fees. Click here to get started.
