How Much Does a Financial Planner Cost?

Barry L. Bulakites

November 11, 2022

Barry L. Bulakites

If you’re planning to hire a financial planner, it’s essential to know how much they charge. Some planners work on a fee-only basis, while others are commission-based. The fee for a fee-only planner is generally higher than the fee for a commission-based advisor. Some hourly-based financial planners offer short-term advice.

Fee-only financial planners charge more than commission-based advisors.

Fee-only financial planners have different models of compensation. These professionals charge fees directly to their clients. Fees can be a flat amount or a percentage of the assets they manage. Some may also charge by the hour. It would help if you understood which model is suitable for your specific situation.

In general, fee-only financial planners charge more than commissions-based advisors. One reason is that fees are more upfront, and commissions are paid after you complete a transaction. Fee-only financial planners are also generally more transparent, and you will be able to determine the fees and costs upfront. However, you should ensure you are getting good value for your money.

The conflict of interest between commissions and fees is often a big factor. In the case of insurance, for instance, commission-based advisers may be biased toward specific products, which may not be best for you. This makes them less likely to act as fiduciary to you. The other reason may be their lack of knowledge of your financial situation. It may also be because the commissions do not cover the cost of advising you.

While commission-based advisors are generally more expensive, some may charge a flat fee to manage your portfolio. Their knowledge of tax-efficient investing and portfolio asset allocation may offset this fee. If you need help determining which fee structure is right for you, be sure to ask.

Hourly-based planners provide short-term advice

Hourly-based financial planners usually provide short-term advice, and their services are typically not long-term. They are not always involved in the implementation process and do not establish ongoing relationships with their clients. This is not ideal for consumers who need continuing advice and a relationship with their planner.

The hourly-based model is particularly appealing to self-implementing people who do not need extensive advice. This type of financial advice works well if you need a second opinion or are looking for one-time financial advice. Hourly-based financial planners are not suitable for those who want a complete investment management plan or want to delegate tasks. They aren’t appropriate for those with high incomes or assets and may not be suitable for everyone.

Hourly-based financial planners generally provide short-term advice and may charge a flat fee. They can also assign a percentage of your assets under management, which includes planning and advice. Some of these planners also charge commissions based on stock trades.

Fee-based financial planners can enter conflicts of interest more quickly than hourly-based planners. If a financial planner sells a financial product, they must disclose this. Another essential factor is whether the planner is affiliated with a securities brokerage firm. If a planner is affiliated with a broker-dealer, you should ask if the firm has a policy regarding conflicts of interest.

Flat-fee financial planners charge less than commission-based advisors

Unlike commission-based advisors, flat-fee financial planners do not accept client referral fees, kickbacks, or other incentive compensation. This means that they can give better advice to their clients. They also won’t take referral fees, bonuses, or other company incentives.

Flat-fee financial advisors usually charge a flat fee and make money through the products and services they manage and sell. These advisors charge between $100 and $400 per hour. The fees do not change according to the number of assets you have, so they are ideal for long-term relationships. Hourly fees may be tied to an up-front retainer cost, though. For example, you might pay $2,000 to a flat-fee financial advisor for an annual financial plan.

In recent years, the number of flat-fee financial planners has increased. Many of these planners offer “Quickstart” programs, one or two-hour programs covering a single or two-topic financial plan. These programs are typically less expensive and geared toward those clients who cannot afford comprehensive plans.

A flat-fee financial planner may not have the experience to handle your portfolio, but they are less expensive than commission-based advisors. They are also more likely to stay local by investing their money in the area. While fee-only financial planners may cost less than a commissioned broker, they will charge you based on their expertise, experience level, and appetite for new clients.