Ask ten advisors what they cost and you get ten shapes of answer. A percentage. A retainer. “Nothing, the company pays me.” That last one is never true.
There are five ways advisors get paid. Each one costs a different amount, and each one rewards a different behavior. Both matter.
1. A percentage of your assets
This is the most common way to pay for ongoing management. In a survey of about 1,000 advisors, the median fee was 1% a year on accounts up to $1 million, closer to 1.25% on accounts under $250,000, and lower above $1 million.
In dollars, at 1%: $2,500 a year on $250,000. $5,000 on $500,000. $10,000 on $1 million.
The same survey put the median all-in cost, with fund expenses and trading costs added, at about 1.65% for accounts up to $1 million. So ask for the all-in number, not just the advisory fee.
What it rewards: keeping your money with the advisor and growing it. That mostly lines up with you. Not always. Paying off a mortgage or buying a business shrinks the account, and the fee with it.
2. A flat yearly fee
A set dollar amount for planning, investment management, or both. It does not go up because the market did.
What it rewards: keeping you as a client. Check the scope, because “flat fee” can mean a full plan with tax coordination or two meetings a year.
3. Hourly
You pay for time, the way you pay a lawyer. It fits a specific question: a job offer, a pension choice, a second look at a plan.
What it rewards: hours. Ask for an estimate before the clock starts.
4. A one-time plan
A project fee for a written plan. You carry it out yourself, or come back later for help.
What it rewards: finishing the plan. It is a good first step if you are not sure you need anyone ongoing.
5. Commissions
Here the product pays the advisor: a sales charge on a mutual fund, a commission on an annuity or an insurance policy. You may never see a bill. You still pay. The cost is built into the product.
What it rewards: the sale. The SEC’s own guide for investors says the way brokers make money creates some conflicts with your interests, and tells you to ask about them. Take that advice.
What I charge, so you can compare
An article about cost from someone who hides his own would be a joke. So: for ongoing work I charge 1% a year on the first $1 million, lower above that. Planning together with investment management is $7,500 a year, or the asset-based fee if that is higher. A one-time Starter Plan starts at $1,500. It is all on the services page.
I am not the cheapest and not the most expensive. That is not the point. The point is that you can see the number before you ever talk to me.
The only comparison that works
You cannot compare a percentage with a retainer with a commission in your head. Turn each one into dollars per year, for your account, and then ask what you get for it.
Cost is half the answer. The other half is whether you need the help at all, and some people do not. The 19-question quiz is built to say so when that is the case.
A fee you can see is a fee you can judge. Be careful with the ones you cannot see.
Related questions: is a 1% advisor fee worth it, what a wrap fee covers, what a good expense ratio is and what a financial advisor actually does.
One question for this week: can you say, in dollars, what you paid for financial advice last year? If not, that is the first thing to find out.
As always, if you want to talk any of this through, the door is open. Genti