What is the Cost of Working with a Financial Advisor? Is It Worth It?

When considering a financial advisor, the first question is often, "How much will this cost me?"

But perhaps the better question is, "What is the cost of not hiring one?"

Hiring a financial advisor isn’t just about fees. It’s an investment in professional expertise, guidance, and long-term financial planning that can save you far more than what you pay. In this article, we’ll break down typical advisor fees, common mistakes people make without an advisor, and why the value of professional guidance often far outweighs the cost.

Understanding the 5 Types of Financial Advisor Fee Structures

Financial advisors typically charge in several ways. Here’s a breakdown of the most common fee models, with average costs included:

1. Fixed Fees

Fixed fees are charged for one-time services like creating a financial plan or a retirement income strategy. These fees typically range from $1,500 to $6,000. For example, we offer fixed fees for clients with lower income or assets, providing them with a customized plan without ongoing management. See our Pricing page for current rates.

2. Assets Under Management (AUM)

AUM is a common fee structure, where advisors charge a percentage of the assets they manage. The typical range is 0.5% to 1.5% annually, deducted directly from your investment accounts. For example, if you have a $500,000 portfolio, at 1% AUM, you’d pay $5,000 per year. The fees are deducted straight from your accounts on either a quarterly or monthly basis. We charge 1% AUM for clients with at least $250,000 in assets, with discounts available for portfolios over $1M. 

3. Monthly Subscription

The subscription model provides ongoing access to financial advice at a consistent monthly fee, typically ranging from $200 to $1,500 per month. It’s ideal for clients who don’t have large investable assets but still need regular guidance on financial planning, taxes, and investments. We offer a subscription service for high-complexity clients like business owners, who may not have a significant amount of assets yet but need comprehensive planning. This also allows us to provide additional services like business planning. See our Pricing page for current rates.

4. Hourly Fees

Hourly fees range from $250 to $500 per hour, depending on the advisor. Comprehensive financial plans typically take around 10 to 20 hours to create, so the total cost would range from $2,500 to $10,000.

5. Commissions

Some advisors, particularly those who sell financial products, work on a commission basis. For instance, you might pay a 3% to 6% upfront commission on investments like mutual funds or annuities. On a $100,000 investment, that would mean $3,000 to $6,000 in fees. Insurance products are also commonly sold on commission.

6 Common Mistakes of DIY Financial Management (And What They Could Cost You)

Managing your finances on your own might seem appealing, but it’s easy to make costly mistakes without professional guidance.

Here are some common DIY errors and what they can cost you:

1. Trying to Time the Market

If you sell during a downturn and miss the market’s recovery, the costs can be steep. For example, missing the 10 best days in the S&P 500 between 1980 and 2022 would result in a $600,000 difference on a $10,000 initial investment ($1,080,00 vs $480,000).

2. Lack of Diversification

Failing to diversify your portfolio could lead to heavy losses if a specific sector, asset class, or stock crashes. A poorly diversified $500,000 portfolio could lose 30% or more, resulting in a $150,000 loss during a market downturn.

3. No Financial Plan

Without a financial plan, it’s easy to miss both short-term and long-term goals. This can mean not saving enough for retirement, but it also means missing opportunities to hit key milestones—like buying a home, starting a business, or funding your kid’s education. The cost here isn’t just money; it’s also time—working longer than necessary or delaying life goals. For example, not having an income plan during retirement can result in running out of money sooner than expected, or missing out on tax-saving opportunities that could lead to hundreds of thousands in unnecessary costs over your lifetime.

4. No Risk Management

Without proper insurance and risk management, an unexpected event like a medical emergency or unexpected home repair could cost you tens of thousands or even more.

5. FOMO and Analysis Paralysis

Jumping into investments due to Fear of Missing Out (FOMO) or hesitating due to analysis paralysis can lead to costly mistakes. Making poor, reactive decisions could lead to significant investment losses costing you 10’s of thousands in a short period.

6. Inconsistent Reviews

Without regularly updating your financial plan, you could be missing out on tax law changes, market opportunities, or lifestyle changes that could improve your situation. For example, neglecting to rebalance a portfolio after market shifts could reduce returns by 0.5% to 1% annually, which could cost $5,000 annually on a $500,000 portfolio.

Value Beyond the Fees: 6 Ways a Financial Advisor Can Help You

Here’s how a financial advisor brings value that justify their fees:

1. Tailored Investment Strategy

Advisors design investment strategies based on research, experience, and access to tools that most DIY investors don’t have. A professional strategy can lead to returns that outperform typical DIY efforts. For instance, even a 1% improvement in returns on a $500,000 portfolio could result in $5,000 more per year.

2. Tax Planning

A well-structured tax strategy can save you significant amounts. For example, properly utilizing tax-deferred accounts like 401(k)s and IRAs could save you $10,000+ annually in taxes, while S-Corp structuring for business owners can lead to even greater savings.

3. Accountability

Just like hiring a personal trainer helps you stick to your fitness goals, a financial advisor keeps you accountable to your financial goals. Staying disciplined with saving and investing could mean hitting your retirement target years earlier, potentially getting you to retirement 2-5 years sooner.

4. Second (Expert) Opinion

A financial advisor provides a second set of (expert) eyes, catching mistakes you may have overlooked. For example, a poorly timed retirement decision could cost you $50,000+ in lost Social Security benefits alone. Understanding the power of Roth Conversions could save you hundreds of thousands over your lifetime.

5. Personalized Advice

Unlike the one-size-fits-all advice you might find online, an advisor gives personalized advice tailored to your unique situation, which can help you avoid costly mistakes and maximize opportunities specific to you. They help you cut through the noise and information overload by focusing on the areas and opportunities that are going to move the needle the most for you.

6. Behavioral Finance Guidance

Advisors help you manage emotions like fear and greed, preventing you from making rash decisions during market swings or when you have a surplus or money. Avoiding a single emotionally-driven mistake, such as selling during a downturn, could save you $50,000+ in lost growth.

Comparing the Cost of a Financial Advisor to Other Services

To put the cost of a financial advisor into perspective, here’s how it compares to other services that buy back your time or provide expertise in areas you might not be skilled in:

Service	Average Cost	Financial Advisor Comparison
Personal Trainer	$7,500 Annually (2x/week @ $75 per)	$5,000 - $10,000 Annually (AUM on $500k-$1M portfolio)
Personal Chef	$12,500 Annually ($250/week)	$6,000 - $12,000 Annually (Subscription Model)
Cleaning Service	$3,900 Annually ($150 every other week)	$2,000 - $6,000 (One Time Plan)
Lawn Care	$200 - 500/month	$300 - $1,000 /month (Subscription Model)
Massage Therapist	$300 - 600 /month	$400 - $800 /month (AUM on $500k-$1M portfolio)
Hair/Beauty Services	$1,800 Annually ($200 every 6 weeks)	6 hours @ $300/hr = $1,800 (Hourly Work)
Tax Preparation	$500 - $3,000	$2,000 - $6,000 (One Time Plan)
Legal Services	$250 - $1,000+/hour	$250 - $500/hour (Hourly Work)

The cost of working with a financial advisor is comparable to, or even less than, many other services people regularly pay for. More importantly, the potential return on that investment far outweighs the cost when you factor in tax savings, better investment strategies, and long-term financial security.

Is Working with a Financial Advisor Worth the Cost?

Working with a financial advisor is more than just paying a fee. It’s an investment in your future that provides peace of mind, helps you build wealth, and ensures you make smart financial decisions. When you consider the savings, tax advantages, and potential for higher returns, the cost of a financial advisor is not just justified—it’s often a bargain.

While you might be the type of person who prefers to handle things yourself—whether it’s cutting your own hair, filing your taxes, or cooking your meals—there is undeniable value in having an expert take care of these tasks. Not only will they often do them better, but they also free up your time to focus on what matters most to you. The key difference when working with a financial advisor is that they are actively working to help increase your wealth. If they do their job well, you're almost guaranteed to come out ahead—that’s exactly what you’re paying them for. 

Like any investment, there is some risk involved, but investing in your own financial success is one of the smartest moves you can make.

Disclaimer: The monetary examples and references provided in this article are illustrative and may vary depending on individual circumstances. Everyone's financial situation is unique, and many factors can influence the amount of money saved, lost, or gained. These figures are intended to offer general context around potential outcomes but are not a guarantee of specific results. Your actual experience may differ based on your personal financial situation and market conditions.