You may already have a financial advisor or are shopping for one, but you may not know what you’re getting for the fee that you’re paying. We’re going to try our best to outline multiple categories of fees to help you get your head around what different advisors may charge and why.

What are You Getting for the Fee You Pay an Advisor?

Fees vary greatly from one type of advisor to another. We’re not going into this saying one fee is good or one is bad. For example, if I said I bought a $3,000 car, what would you think? You would assume it’s not the latest model on the market and doesn’t have a backup camera, lane assist, or any of the fancy features a higher-end vehicle might have.

A $50,000 car will have all the bells and whistles, but you may not need all those features.

Financial advisor fees are very similar. Lower fees often mean that you’re doing more, and the advisor is doing less for you. But if you don’t need some services or don’t mind having a hands-on approach to retirement planning, then the lower fees are perfect.

With this in mind, let’s dive into the meat of the fee world.

Fees in the World of Financial Advisors

You may come across the following fees when working with a financial advisor:

Transactional Fee

An hourly fee is exactly what it sounds like. You pay an hourly rate in a pay-as-you-go type of scenario. The planner may also have a set fee for certain services. In many cases, you’ll meet with this person once or twice per year, and then you are responsible for executing the plan.

If you’re the type of person who does the following, transactional fees may be good for you:

1. Does their own taxes
2. Paints their own house
3. Does their own yard work

Many people don’t want to build their own portfolio and would rather spend time with their family, but for others, it makes more sense to have a transactional fee.

Assets Under Management Fee

In an assets under management fee structure, you’re charged a percentage of the assets that you entrust under the advisor’s management. Fees can range anywhere from .3 or .4% to 2 or 2.5%.

So, if you have $1 million in assets that the person controls, your fee at a 2.5% rate would be $25,000 per year. 

Fees vary by region, investment strategy, types of assets and advisor.

Commission-based

In some scenarios, the advisor may be paid a commission for insurance products that they sign their clients up for or for stock purchases.

Assets Under Management Fees are the Most Common

As a financial advisor, we see that assets under management is the most common fee structure. While the range can be great, we see most advisors charging 0.75% – 2% fees, and the more assets under management, the lower the fee percentage will be.

What do you get for these fees?

Full-service or Concierge Service

You’ll pay the highest fee for this type of service, but you enjoy the most hands-off experience possible. You’re working with a specialist who handles your retirement planning and strategy for you.

In our business, we call this the integrated wealth management system and cover things like:

1. Investment-How do we invest for a return with good risk management in place?
2. Retirement-focused financial plan-We cover where you are today, Social Security, and whether you will have the money you need to reach your retirement goals. 
3. Tax strategy-As you accumulate wealth, you have money in multiple buckets, and we want to pay attention to withdrawals and how that will impact you today and in the future. Minimizing your tax burden is really the goal for us in this regard. We can save some clients thousands of dollars by finding tax mistakes or employing other tax-saving strategies.
4. Estate planning– In this category, we’re talking about wills, trusts, power of attorney, life insurance and more.

We also cover things like continuous care scenarios or long-term care, and it just keeps evolving. Our in-house Medicare Specialist works with our clients to help them onboard for Medicare, find the best solutions for them and really ease our clients’ minds in the long term.

If you’re not sure which fee structure is best for you, consider the following:

• Lower fees mean that you take a hands-on approach
• Higher fees mean that you take more of a hands-off approach

For our fee, we try to cover everything for our clients, from tax planning to Medicare and estate planning. You may not need this high of a level of service, but it’s often the difference between 0.75% and 2%.

So, when searching for a financial advisor, be sure to know exactly what you’re getting for your fee because it can be substantial.

Schedule a call to talk to us about our financial planning services.