Personal Finance
Is It Worth Paying a Financial Advisor 1%?
Whether you have a financial advisor or are considering working with one, you may be wondering: Are their fees worth the cost?
Navigating the complex world of financial planning and investment can be daunting.
A financial advisor can not only help manage your money, but also help guide your financial decision-making, and may tailor potential strategies to your unique goals.
But with annual fees typically ranging from 0.59% to 1.18% annually, according to an Advisory HQ study, you might wonder if the cost is justified.¹
Research suggests people who work with a financial advisor could end up with about 15% more money to spend in retirement.²
A 2022 Northwestern Mutual study found that 62% of U.S. adults admit their financial planning needs improvement. However, only 35% of Americans work with a financial advisor.³
Consulting a fiduciary financial advisor can be a great first step to helping make sure you’re on track to meet your financial goals, regardless of your income level. That's why we created a free tool to help match you with up to three financial advisors.
Click here to take our free quiz and get matched with vetted advisors in just a few minutes, each obligated to work in your best interest.
Here's some information on the different ways financial advisors charge for their services and how you can think about evaluating their cost.
Financial Advisor Fee Types
Financial advisors can offer more than just investment advice. From creating a robust retirement savings plan to advising on debt management and insurance coverage, their expertise can be broad.
For instance, a Certified Financial Planner™ (CFP®) could offer holistic financial advice, while a Chartered Financial Analyst (CFA) might focus more on investment strategies.
The type of advisor you choose could influence the fee structure and the potential investment outcomes.
Depending on the advisor, their fee structure may be put together in one of these six common ways:
- Hourly rate
- Flat fee
- Quarterly or annual retainer fee
- Percentage of the client’s assets under management (AUM)
- Commissions only
- Combination of commissions and fees
Fee-only advisors charge based on the services they offer. So they might charge you by the hour or as a percentage of your assets. They may also use a retainer fee on a flat-fee basis for individual services.
Fee-based advisors make money by charging a combination of fees and earning commissions on investments and financial products. So you might pay your advisor the average hourly fee of $120 to $300 per hour, according to Advisory HQ. But you may also pay them a commission fee each time you purchase an investment they recommend.
To help reduce the risk of conflicts of interest with an advisor and the products they recommend, it could be a good idea to work with a fiduciary financial advisor, legally bound to work in your best interest. Click here to get matched with up to three fiduciary advisors who serve your area.
Evaluating the Cost of Financial Advice
Is a 1% fee reasonable? It could depend on the potential value derived from the advisor's services.
If you’re already working with an advisor who has helped you achieve significant financial milestones, such as outperforming investment benchmarks or efficiently managing debt, their fee could be considered a small price for substantial gains. However, it can be essential to assess their performance and ensure it aligns with your financial objectives.
For those new to financial advisors, examining potential advisors' track records and client reviews could provide potential insight into their value, helping you decide if the investment could be worthwhile.
All of the advisors on SmartAsset’s matching platform are vetted fiduciaries. You can get matched with up to three advisors using this free tool.
How to Get Help Finding a Financial Advisor
Investing in a financial advisor could potentially impact your financial health, especially when complex decisions are at stake.
While fees are an important consideration, the value provided by expert advice could potentially help justify the cost.
Consulting a fiduciary financial advisor could help you determine a plan that factors your goals, assets and taxes into your overall financial plan. Fiduciaries are obligated by law to act in your best interest and any potential conflicts of interest must be disclosed.
Yet knowing how to find a vetted fiduciary advisor is, for many, the most confusing task of all. Common Google searches related to the topic reveal a desperate search for direction.
"Fiduciary financial advisors near me,” "best fiduciary financial advisor,” and "financial investment advisors near me” are searched hundreds of times per day.
Finding a fiduciary shouldn't be that hard. Thankfully, now it isn't.
SmartAsset’s free matching quiz helps Americans get matched with up to three fiduciary advisors who serve their area so they can compare and decide which advisor to work with. All advisors on the matching platform have been vetted through our proprietary due diligence process.
The quiz takes just a few minutes, and in many cases, you can be connected instantly with an advisor to have an introductory call.
The information contained in this article is general and not specific to any individual's situation. The SmartAsset quiz matches you with up to 3 financial advisors to which you can compare and decide which to work with.
This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
SmartAsset Advisors, LLC ("SmartAsset"), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset receives compensation from Advisers for our services. SmartAsset does not review the ongoing performance of any Adviser, participate in the management of any user’s account by an Adviser or provide advice regarding specific investments. We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.
SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). SmartAsset is not a financial planner, broker or tax adviser. The Service is intended only to assist you in your understanding of financial organization and decision-making and is broad in scope. Your personal financial situation is unique, and any information and investing strategies obtained through SmartAsset.com may not be appropriate for your situation. Accordingly, before making any final decisions or implementing any financial strategy, you should consider obtaining additional information and advice from your accountant or other financial advisers who are fully aware of your individual circumstances.
Sources:
- "What are the Average Financial Advisor Fees & Investment Fees Being Charged in 2021?", AdvisoryHQ (July 2021). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the AdvisoryHQ study.
- "Journal of Retirement Study Winter" (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.
- “Planning and Progress”, Northwestern Mutual (2022)
