Financial Advisor Fees & Costs

One of the advantages of finding a financial advisor through Zoe Financial is that we provide you with professionals who have transparent fees. That’s because you shouldn’t need a Ph.D. in Finance to figure out which financial advisor fees you’re paying and what services you’re receiving. The advisors in our network have undergone a rigorous vetting process and represent the top 5% of independent advisors in America. We take great care in matching you with not just any available financial advisor, but the right financial advisor for you.

The most common type of financial advisor fees are:

  • % of Assets Under Management Fees – The advisor receives a percentage on the balance of your investment accounts that they manage on your behalf. These typically range from 0.5% to 1.25%, depending on the size of the investment and the services provided. E.g. if your advisor manages $500,000 in assets, you can expect to pay between 1% and 1.25% ($5,000 – $6,250) in fees per year. However, if they manage $2,000,000 on your behalf, fees between 0.75% and 1% can be expected. Many people prefer this fee option as the advisor’s compensation is tied to how well your investments perform i.e. your incentives are aligned. The downside is that there is often a minimum balance of investable assets required in order to motivate a good advisor to provide the full service. 
  • Retainer Fees (flat fee) – An advisor may charge between $2,000 and $10,000 annually to provide comprehensive financial planning, while leaving the actual managing of the investments to you. There are, however, some advisors that will charge a flat fee for both comprehensive financial planning AND the managing of your investments. The range for that type of full service is $5,000 – $30,000 per year.  The upside is that there are often lower minimum balance requirements of investable assets (or something with no minimum). Some people prefer this flat fee option as it caps the annual expense regardless of the total of investable assets.
  • Project Fees – If you need an initial financial plan, the advisor may offer to do this as a once-off service. Here, you would pay $700 – $3,500 for the two or three sessions necessary to create a comprehensive financial plan, along with recommendations for you to implement.
  • Hourly Fees – The advisor charges just for the hours consulted. This fee can range from $150 to $400 per hour, depending on the advisor’s experience and the complexity of the topics covered. Do-It-Yourself-type clients sometimes prefer this option, as they get to consult a professional on specific questions without having to pay for a full, ongoing service.

Should you find a fee-only financial planner?

The benefit of working with an independent, fee-only financial planner (versus a commission-based or fee-based planner) is that you know they are there to serve your best interests, because no one else is paying them. You can rest assured that they’re not pushing particular investment strategies or insurance products onto you in an effort to earn kickbacks.

Now, having an advisor that is fee-only does not guarantee you’ll get sound financial advice, since the hurdle to become an advisor is very low. Nevertheless, having a fee-only advisor does alleviate a number of potential conflicts of interest. You may also enjoy a broader array of options, as your planner is not limited to products that will earn them commissions.

Questions to ask a financial advisor about fees

Here are some questions you should ask a fee-only advisor before you hire them, along with the ideal responses:


Q. Are you licensed to receive any commission for insurance products?  

A. The answer should be “No”. 


Q. Do you receive any compensation from any insurance company for recommending any of their products? 

A. The answer should be a flat-out “No”.  Sometimes, advisors will get around this answer by saying they only collect insurance “consulting fees” instead of commissions. However, this is essentially the same thing. They are getting paid by someone other than you.


Q. Do you receive any compensation from any investment company for recommending any of their products? 

A. This should also be a “No”. Some advisors will say that they do not receive commissions specifically, but they actually still receive backdoor kickbacks that you are paying via 12-1B fees from mutual fund companies. Those additional fees can range from 0.25% to 1%, which can really add up!


Q. Do you earn commission from private funds or other investments? 

A.  The answer should be “No”.


Q.  Are all of your fees itemized in writing? 

A. The answer here should be “Yes”.


Q. How many clients per ‘client-facing’ advisor does your practice have? 

A. If the practice has more than 90 clients per advisor, then the advisor does not really have a high-touch, full-service practice. Thus, fees should be well below what full-service advisors charge.

Are advisory fees worth it?

Like any service, advisors can be considered expensive or cheap depending on the value they provide. Paying $3,000 for generic financial advice from a salesperson that manages 300 clients is a waste of money. Having said that, a top Certified Financial Planner that manages no more than 70 clients who charges $6,000 might end up saving you multiples of the cost via behavioral coaching and tax optimization alone. In fact, both Vanguard’s and Morningstar’s research estimate that good advisors generate an additional 1.5% – 3% annual return when compared to clients who invest alone. This means that even after accounting for a 1% annual investment management fee, the financial advice can still have a significant positive impact on a client’s financial future.

Does that mean a higher cost implicitly means a higher value? Not necessarily. There are plenty of advisors who promise a personalized, high touch service but in reality provide generic asset allocation implementation that a robo-advisor can do for a fraction of the cost. That’s why it’s important to do the due diligence up front!

Paying advisory fees should be a small price to pay for behavioral coaching, vigilance, and peace of mind that a great advisor provides each of his or her clients.

The broader benefits of working with a financial advisor are in the comprehensive planning, personalized portfolio construction, behavioral coaching, and day-to-day wealth management services – all of which should be based on your specific goals and risk tolerance. In addition to the advisor’s alpha, the time you will save and stress you will avoid should not be underestimated. Sure, they are tougher to quantify, but they make a huge impact on a client’s personal happiness and fulfilment.


Where to Find Your Financial Advisor’s Fees


Advisors must itemize all financial advisor fees on the Form ADV paperwork filed with the SEC. You will find a brief overview in Section 5 of Part I, and greater detail in Part II. To keep overall costs low, you may consider working with a fee-only financial advisor where there are more transparent fee structures and fewer possible conflicts of interest. Don’t be afraid to ask questions!