In the last several years, America has witnessed an explosive popularity of the financial planning service sector. Nonetheless, little remains known about the fees that financial advisors actually charge you for their services.
To offer some transparency on the topic, we have gathered for you some of the most robust research and data ever collected on financial planners' service fees. The information below is based on historical data from leading sources like the "Financial Plan Development and Fees" study produced in 2012 by the Financial Planning Association (FPA) and later build on by the "Kitces FP Process Research Survey, 2019". These two reports are built on feedback received from a sample of 1,500+ lead and associate financial advisors, nationwide.
As a closing note before we show you the actual figures, we think it's important for you to understand that what a financial planner has to offer is not only reserved for the rich and famous. Although it might seem as an unnecessarily high, upfront expense, don't forget that an advisor can often save you money in the long run. Their expert knowledge and sense of risk management, is what you need especially in times of market downturns. And considering your own knowledge, levels of risk aversion and daily responsibilities, you should ask yourself:
Can I afford NOT to have a financial advisor?
To keep things simple, think about the pricing of your financial planning service as a package comprised of two basic elements:
- Planning Fee - comprehensive assessment of your financial situation and development of a personalized financial plan, uniquely tailored to your needs.
- Investment Management Fee - typically advisors will charge the so called Assets Under Management (AUM) fee, for ongoing management of your investment portfolio. This is a percentage fee based on the total dollar amount of managed assets (usually 1-2% of the value of your net assets).
Fees For A Financial Plan
A growing number of advisors will charge for the development of financial plans solely in a "fee-for-service" manner (hourly rates, monthly subscriptions, annual retainer fees).
Noticeably, standalone and hourly rates remain the same for both types of pricing structures. However, when the AUM model is removed from the picture (Flat Fee Plan), the retainer fees must carry the full weight of supporting the ongoing financial planning relationship and therefore appear twice as much.