The Tell-All Series: How Do Advisors Get Paid?

Published June 29, 2022 

Reading Time: 4 minutes

Written by: The Zoe Team

There are three ways Zoe’s advisors get paid. The more closely aligned the advisor’s interest is to yours, the better!

The journey of partnering with a wealth advisor can be daunting for many. With this in mind, we created the blog series: The Tell-All about Financial Advisors. This post outlines the varied ways Zoe advisors get paid. Other Tell-All’s include: Brokers vs. Advisors, What Makes For A Great Advisor? and finally, Do I Need a Financial Advisor? 

Three Ways Financial Advisors Get Paid

In the Zoe Network, there are three plans you can choose from to hire an advisor. The information below provides insight into how advisors are paid and details on how each plan helps align the advisor’s interests with those of the client— the more closely aligned, the better.

1. One-Time Plan

We see fees for a one-time financial plan ranging from $1,500-$5,000 depending on your financial situation.

Is this the ideal plan for you?: This is ideal if you have a narrow question or decision that needs to be made, or you are very comfortable self-managing your investments, but just want an advisor to help construct a plan.

Looking for something more?: The downside of a one-time financial plan is that it is a static document in time. Should your family’s situation change, most likely your plan will need updating. More often than not, families are opting into an ongoing relationship with an advisor so they can build a relationship and allow that advisor to be proactive in protecting their wealth.

2. Flat Fee Retainer

The client pays the advisor a monthly flat-fee ranging from $100 to $500 to begin a relationship with a dedicated financial planner. In many instances, fee-based payments may also include commissions on products sold. The yearly fee varies significantly depending on the complexity of the client’s case. Depending on how the planner or advisor works, this can be in the form of an upfront fee, a once-off fee, a monthly fee, or an annual fee.

What are you paying your Flat Fee Retainer advisor for:

Financial Advisor Fee

Is this the plan for you?: This is ideal if most of your assets are tied up in workplace retirement plans or stock options. You are younger in your financial journey and in the accumulator phase and would like ongoing guidance on how to save more, invest smartly, and plan for your short-term and long-term goals.

Looking for something more?: The downside of this service is that an advisor is typically not actively managing your assets.

3. Asset Under Management (AUM)

This is the most common fee structure offered amongst advisors. It is a full-service financial advisor relationship.

We see fees ranging from .80% to 1.5% of the assets an advisor manages. For example, if you were to hire an advisor under the AUM fee structure, and they managed $1 million dollars for you, their annual fee would be 1% of those investments, which would equate to a $10,000 annual advisor fee. This is not an out-of-pocket expense, the fees come directly from your investment account.

What are you paying your AUM advisor for:

AUM

Is this the plan for you?: This is ideal if you are transitioning into retirement, or if you do not feel comfortable managing your investments on a daily basis. This is the most all-encompassing and full service you can get from a financial advisor. Most busy families opt into this relationship because of that.

Looking for something more?: The downside of this service is only if you do not want an advisor managing your assets, or would like to begin in a less all-encompassing relationship. We see families every week start with a One Time Plan or Retainer option to later migrate to an AUM relationship when it makes sense.

The above is related to aligning the interests of the advisor and client, they are NOT recommendations on the advisors’ skills or abilities. However, by knowing how advisors make money, you can identify the payment options that are most suitable to you. With that knowledge, you can get a better sense of whether or not an advisor is a good fit from the get-go.

Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

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