SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below.
The fee your advisor charges is based on the services you’re receiving, the individual advisor’s fee structure and other factors, including the amount of money you have to invest. With $1.4 million invested, many advisors would likely charge about 1% of the account balance as an annual fee. However, this could vary widely among advisors. You can, however, negotiate with many advisors and possibly pay less. In a pinch, you can always decide to go with another advisor who charges less, offers a selection of services that better fit your needs or is preferable in other ways.
You can use this free tool to match with a vetted fiduciary financial advisor to discuss their fee structure.
Financial advisors charge for their services in a number of different ways. The five primary fee setups are listed below, along with brief descriptions:
|
Type |
Details |
|
Percentage of assets under management |
Based on a percentage of the total assets in your account. May differ based on account size. |
|
Hourly rate |
A dollar amount charged per hour of work. |
|
Flat fee |
A flat fee, usually annual, for providing services. |
|
Commission |
Compensation paid by investment product providers |
|
Performance-based |
When a preset performance goal is reached, an additional fee may be paid. |
Fees based on a percentage of assets under management usually vary from 0.5% to 1.5%. A fee of 1% is about average. The fee may be tiered, with smaller accounts paying a higher percentage and larger accounts paying less.
With $1.4 million in an account and a 1% fee, an investor would pay approximately $14,000 per year in fees. This may not be all the fees that are charged, or that the advisor receives. For instance, an advisor may receive a combination of fees paid by the investor, as well as commissions paid for trades or by financial companies that provide investment products.
A 1% fee may be a bargain, or it may be too much. It depends in part on the services you receive in exchange. Advisors can supply you with expertise and experience along with an objective source of suggestions about ways to reach your financial goals. The topics you can expect help with include investing, retirement, estate planning and taxes. The benefits you may receive can include avoiding or reducing losses and maximizing gains.
Advisors can have different value at different stages of your life. When you’re younger and have few assets, it may be less useful to have a professional overseeing your financial affairs. As you near retirement and have accumulated significant account balances, the stakes are higher and well-seasoned advice becomes more important.
