Is It Worth Paying a Financial Advisor 1%?

Financial advisors can offer valuable guidance on achieving your financial goals, but their expertise comes at a cost. According to a 2023 report by AdvisoryHQ, average annual fees range between 0.59% and 1.18% of assets under management (AUM), with rates often decreasing as your investment amount increases.

Whether the cost is justified depends on your personal financial situation and the potential value you derive from their services.

Understanding the Role of Advisors

Financial advisors have different specializations and certifications. A Certified Financial Planner™ (CFP®) can typically provide comprehensive advice, including debt management and retirement planning, while a Chartered Financial Analyst (CFA®) may focus more on investment strategies. The type of advisor you choose can influence the type of fee that you pay.

Determining the worth of a financial advisor’s fee is subjective. If your advisor has consistently helped you achieve significant returns or reach major financial milestones, their fee may be a small price to pay for success. However, if your needs are basic, a 1% fee may feel high.

Types of Advisory Fees

In addition to AUM fees, financial advisors may charge a variety of fee structures or a combination of all. These can include:

Hourly rates

Flat fees

Retainers

Commissions

Robo-advisors, which use algorithms to manage investments, typically charge lower fees but offer far less personalization than a human advisor.

Deciding on Financial Advisor Services

Whether to hire a financial advisor and for how long to retain their services depends on your financial knowledge, investment experience, and the complexity of your needs. If you have a substantial portfolio or lack investment expertise, a financial advisor’s insights could be potentially invaluable. Conversely, those with a strong financial acumen or smaller asset pools might consider self-management.

Take Action

When deciding whether to engage a financial advisor, be sure to:

Assess the value an advisor could potentially add to your financial growth

Compare fees against the level of personalized service and advice you require

Ask an advisor if they’re fee-based or fee-only, and question any advisor who doesn’t share information about their fees

Considering a financial advisor? Understand the potential value and costs.

Schedule a consultation here. All investing involves risk, including loss of principal.