Ultimately, it depends on the type of advice you are seeking, the amount of money you have, and the overall complexity of your situation.
Investment Advice: 0.25% to 1% depending on how much interaction you want to have with a person. A portfolio run by an algorithm, commonly known as a robo advisor, will be less expensive. Robo advisors will not offer a personalized plan but will provide resources, such as calculators.
Financial Planning: If you are seeking advice about retirement, college, or general personal finance you can pay for advice either hourly ($200 to $400 per hour) or via a flat fee or retainer ($1,000 to $10,000). Fees range based on scope of advice, complexity, and service levels.
Note: Some advisors will charge separate fees for investment and financial planning advice. In other cases, investment advisors will include planning services as part of the asset management fee.
Commissions: While this structure presents conflicts of interest, it is a way to obtain limited advice around insurance or investments without having to pay a stand alone advisory fee. Bear in mind that the advisor may have an incentive to recommend one investment over another depending on commissions paid for various products.
Incentive structures matter: Think about how each compensation structure works and what you expect. If you want comprehensive advice, a commission structure will leave you disappointed because of its limited scope. If you want to do it yourself but get an independent second opinion, an hourly arrangement would be the best fit. And if you want comprehensive advice and someone else to manage everything, an advisory fee or an annual financial planning retainer would be the best fit.
While the costs of a financial advisor can vary greatly, they are simply a market reaction to consumer needs. If you have a simple situation, a large retainer based fee will not make sense. Alternatively, a robo advisor may not offer the personalized advice that might be required in a more complex situation. Try to identify where you are most likely to fit, and interview a range of advisory firms with these questions in mind. The wide range of options available means there is a good fit for virtually every situation.
This is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.
LPWM LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers.