Financial Advisor Hidden Costs: Avoid Double Fees (2024)

FAQs

Is it worth paying a financial advisor 2%? ›

Without knowing the full scope of services delivered by the advisor, 2% may be too expensive for a portfolio of your size and for a relationship in which tax advice is not provided. This immediate, high-level evaluation is based on benchmarks for typical advisory fees, which we'll dive into shortly.

Bottom Line. On average, financial advisors charge between 0.59% and 1.18% of assets under management for their asset management. At 1%, an advisor's fee is well within the industry average. Whether that fee is too much or just right depends entirely on what you think of the advisor's services and performance.

The percentage fee may be adjusted up or down based on the size of an account. While the range of possible AUM fees varies, the fee typically trends lower as assets increase. Advisors may negotiate their fee with an affluent client.

But in general, a 1% management fee is right in line with market averages. Typical financial advisors might charge between about 0.5% on the lower end and 2% on the higher end, but 1% is not unusual.

While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.

What are the fees for Schwab Wealth Advisory? The annual fee for Schwab Wealth Advisory starts at 0.80% of assets and decreases at higher asset levels (see chart). Enrollment minimum is $500,000. Fees for your enrolled accounts are based on daily asset levels and are applied at the end of each quarter.

Robo-advisors are typically the least expensive, followed by online financial planners. An in-person advisor will be the most expensive and may charge you more than 1 percent of your assets annually.

Very 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 also be higher, such as $500,000, $1 million or even more.

There are also some professionals who provide a service but are not customarily tipped. These include the following: Accountants. Financial advisors.

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the deductibility of financial advisor fees for tax years 2018 through 2025. The IRS allows you to deduct up to $3,000 (or $1,500 if married filing separately) in capital losses from your ordinary income each year.

What is a reasonable advisory fee? ›

The average fee for a financial advisor generally comes in at about 1% of the assets they are managing. Be mindful that you may still pay a higher nominal dollar as there's a higher base the percent fee is applied to.

Hiring a single advisor to manage an extensive investment portfolio may be unwise and restrictive since it can include a large number of undertakings.

One common method is for advisors to charge a percentage of the assets they manage on your behalf. This rate often ranges from about 0.5% to 2% per year. For example, if an advisor manages $1,000,000 for you and charges a 1.2% fee, you would pay $12,000 annually for their services.

Life events. Graduating college, getting married, expanding your family and starting a business are some major life events that might cause you to reevaluate your financial situation. A financial advisor can help you manage these life events while making sure you get or stay on track.

Very 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 also be higher, such as $500,000, $1 million or even more.

Industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated. Good advisors will work with you to create a personalized investment plan and identify opportunities to help grow and protect your assets.