When it comes to financial advisor fees, there are a few different ways they can charge their clients. This article will examine the average financial advisor fees and how much you should charge for your services. We’ll also discuss the factors that influence what advisors charge their clients and how much those fees vary.
How Do Financial Advisors Charge Their Clients?
Financial advisors typically charge their clients in one of four ways: a percentage of assets, a flat fee, an hourly rate, or commission.
The most common way financial advisors charge is by taking a percentage of the assets they manage for their clients. This average financial advisor fee typically ranges from 0.50% to 2.00% of the total value of the assets managed. For example, if an advisor manages a client’s $100,000 worth of assets, they would charge a fee of $500 to $2,000.
Another way that advisors can charge their clients is with a flat fee. This type of average financial advisor fee is a set price that the advisor charges for their services, regardless of the number of assets they manage for the client. For example, an advisor may charge a flat fee of $1,500 for managing a client’s portfolio.
Some advisors also charge an hourly rate for their services. This average financial advisor fee can range from $100 to $300 per hour. For example, if an advisor spends 10 hours working on a client’s financial plan, they would charge a fee of $1,000 to $3,000.
Finally, some advisors charge their clients a commission for their services. This average financial advisor fee is based on transactions the advisor makes on behalf of their client. For example, if an advisor buys $10,000 worth of stock for a client, they may charge a commission of $100, or 1.00%.
How Much Do Financial Advisors Charge on Average?
The average financial advisor fee varies depending on the type of service provided and the number of assets managed. For example, an advisor who charges a percentage of assets managed will typically charge 1.00% for managing a portfolio of $100,000. However, if that same advisor manages a portfolio of $1 million, they may only charge 0.50%.
On average, financial advisors who charge a percentage of assets under management typically charge between 0.50% and 2.00%. Advisors who charge a flat fee typically charge between $1,000 and $3,000. And finally, advisors who charge an hourly rate typically charge between $100 and $300 per hour.
Factors That Affect Financial Advisor Fees
A few factors can affect the average financial advisor fee.
- Location: The average financial advisor fee is typically lower in rural areas than in urban areas. This is because there are typically fewer financial advisors in rural areas, so the competition for clients is not as fierce.
- Experience: More experienced financial advisors typically charge higher average fees than less experienced advisors. This is because they have more knowledge and expertise to offer their clients.
- Services Provided: The average financial advisor fee is typically higher for advisors who provide more services to their clients. For example, an advisor who provides tax planning services in addition to investment management will typically charge a higher average fee than an advisor who only provides investment management services.
- Number Of Assets: The average financial advisor fee is typically lower for clients with more assets. This is because advisors can make more money by charging a percentage of assets under management, so they are willing to discount their fees for clients with more assets.
How Much Should You Charge for Your Services?
So now we come to the big question: how much should you charge for your financial advisor services? The answer to this question depends on several factors, including your experience, the services you provide, and the number of assets you manage, as we discussed above.
So how do you determine and calculate your average financial advisor fee? Here are a few steps:
- Know your worth: The first step is to know your worth. This means knowing how much experience you have and what services you provide. Once you know these things, you can start researching the average fees charged by advisors with similar experiences and services.
- Consider your overhead: The next step is to consider your overhead. This includes your office space, marketing expenses, and employee salaries. You need to make sure you charge enough to cover these costs.
- Determine your desired income: The third step is to determine your desired income. This is the amount of money that you want to make each year. Once you know this number, you can start to calculate how many clients you need to reach your goal.
- Calculate your average financial advisor fee: The fourth and final step is to calculate your average financial advisor fee. To do this, you will need to divide your overhead costs by the number of clients you need to reach your desired income. This will give you your average financial advisor fee.
For example, let’s say you want to make $100,000 annually. You have determined that your overhead costs are $50,000 per year. This means that you will need to have 50 clients to reach your goal. Therefore, your average financial advisor fee would be $1,000 per year.
As you can see, there is no easy answer regarding average financial advisor fees. Many factors can affect the average fee, including experience, location, services provided, and the number of assets.
The best way to determine how much you should charge for your services is to know your worth, consider your overhead costs, and calculate your average financial advisor fee. By following these steps, you can ensure you charge enough to reach your goals.