How Much Do Financial Planners Charge?
Let’s talk about fees.
Talking about money can be awkward, especially when we’re talking about fees! The world of financial planner fees can feel especially murky. Are you paying too much? Should you choose hourly fees, flat fees, or a percentage of your assets? And what even is the difference?
Don't stress! We're about to shed some light on the whole situation so you can make informed decisions about your financial future.
Decoding financial planner fee structures
There are several ways that financial planners charge for their services. Here's a quick breakdown of the most common ones, along with typical fee ranges:
Assets Under Management (AUM): This is the classic model where you pay a percentage of the assets the advisor manages for you. The typical fee for this service ranges from 1% to 2% of your assets annually. So, for example, if you have a portfolio of $1,000,000, you could expect to pay an annual fee of $10,000 to $20,000 under this model.
Flat Fees: You pay a set amount, either on an ongoing basis (monthly or quarterly) or per project. Flat fees can range anywhere from $1,000 to $5,000 per year for basic financial planning services and can go higher for more complex financial situations or comprehensive wealth management.
Hourly Rate: Think of this like a consultant; you pay for the advisor's time by the hour. Hourly rates typically range from $100 to $400 per hour, depending on the advisor's experience and location.
Commissions: Advisors earn a fee when you purchase specific financial products they recommend. This can create a conflict of interest, as the advisor may be incentivized to recommend products that are not in your best interest but generate a higher commission for them. Here are some examples of commission-based fees:
Mutual funds: Commissions on mutual funds can vary depending on the share class, but typically range from 1% to 3% of the amount you invest.
Variable annuities: These complex products often come with high upfront commissions, typically around 7%.
Insurance products: Whole life insurance and some variable universal life insurance policies can come with commissions as high as 10% of the first year's premium.
Assets Under Advisement (AUA) or Net Worth-Based Fees: This is a variation on the AUM model, where the fee is based on a percentage of your total assets, not just your invested assets. This can be appealing for those with a significant amount of wealth tied up in non-invested assets like real estate or a business. Fees for this service are typically similar to those for traditional AUM structures, ranging from 0.5% to 1% of your total net worth annually. So, if your net worth is $2 million, the annual fee may be $10,000 to $20,000 under this model.
Factors that influence how much you pay
Beyond the fee structure itself, other things can impact overall financial planner costs:
Complexity of your finances: The more intricate your situation, the more time and expertise an advisor may need, impacting the fee.
Advisor's Experience: Highly experienced planners or those with specialized certifications may charge more.
Services Offered: Comprehensive financial planning and targeted advice will differ in cost.
Your Location: Fees can vary depending on where you live and the local market.
Pro Tip:
Not all fee structures are created equal! Some may hide conflicts of interest, while others prioritize upfront transparency.
The Foresight difference: fee-only, flat-fee, fiduciary
At Foresight Financial Planning, we believe in complete transparency. Here's what sets us apart:
Fee-Only: No commissions whatsoever, eliminating any conflicts of interest.
Flat Fees: Predictable costs for our financial planning and investment management services.
Fiduciary Standard: We're legally obligated to put your interests before our own.
Why our model benefits optometrists
Focus on your needs: We're here to help you with your goals, not sell specific products.
Planning for Practice Ownership: We can work with you on budgeting, loans, and financial projections for buying or expanding your practice.
Navigating Student Loans: Develop efficient repayment strategies to maximize your cash flow.
Getting the best value for your money
The lowest-cost advisor isn't always the best choice. Consider these factors when evaluating advisors:
Qualifications: Look for relevant certifications and experience in working with clients similar to yourself (optometrists).
Communication Style: Choose a planner who makes you feel comfortable and understood.
Service Alignment: Ensure their offerings match your specific needs.
Ready to Take Control of Your Financial Future?
Don't let confusing fees hold you back from getting the financial guidance you need. Schedule a free introductory call with Tyler Day, founder of Foresight Financial Planning. We'll discuss your goals, explain our fee structure, and see if a partnership makes sense.
Featured Articles
