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What Fees Do Financial Advisors Charge?

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Carter Hench
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July 10, 2025

What Fees Do Financial Advisors Charge?

Fees are one of the most debated areas in the financial planning world. And it's no surprise - fees impact your short- and long-term wealth.

That's a big difference! Can a financial advisor add enough value to make up for the higher fees?

Vanguard published a study titled Advisor's Alpha to determine how much value a financial advisor can add. In summary, Vanguard estimates that a skilled financial advisor can add about 3% in net annual value to a client’s portfolio over time through behavioral coaching, rebalancing, asset location, withdrawal Strategy, and more.

It’s frustrating - and honestly, disheartening - to see people paying 1% or more in advisory fees only to be dropped into the same model portfolio as everyone else… and then barely hear from their advisor again.

No tax planning.
No proactive advice.
No coordination around retirement, Social Security, insurance, or equity comp.
Just a generic portfolio and silence.

If that sounds like your experience, here’s the reality:
You’re probably overpaying - and getting very little in return.

Fees aren’t the problem. Fees without value are.

A true advisor should be a thinking partner - helping you navigate decisions, avoid mistakes, and move confidently toward your goals. You deserve more than a cookie-cutter investment strategy.

While each type of financial advisor has their own approach to fees and there’s no one-size-fits-all, here are three universal truths:

  • There is no perfect fee model.
  • Every fee structure has some form of conflict of interest.
  • "Free" advice usually isn’t free - unless it’s truly pro bono.

Let’s walk through the most common ways financial advisors charge for their services:

🛡️ Commission-Based Fees

Advisors earn money only when you buy a financial product from them - like a real estate agent gets paid when you buy or sell a house. The commission is typically a percentage of the product cost.

For example, if you purchase a $1 million annuity with a 5% commission, the advisor earns $50,000.

Commissions often come from products like:

  • Annuities
  • Life, disability, and long-term care insurance
  • Mutual funds, structured notes, or other investments

Sometimes a financial advisor who earns commissions will offer a “free financial plan” and at first glance, that sounds like a great deal.

But be cautious - if the plan is built around selling a specific product, the advice may be more about justifying the sale than serving your best interest.

A financial plan should lead to the right solutions - not the other way around.

Upsides:

  • One-time cost to the client
  • You don’t pay the fee out-of-pocket - it's baked into the product (you're still paying for it)
  • Allows access to financial advice and guidance for those who may not meet minimums for other fee models

⚠️ Downsides:

  • Can be confusing or lack transparency
  • Creates incentives for unnecessary transactions (e.g., swapping an old annuity for a newer annuity with no real benefit)
  • These advisors are not required to act as fiduciaries
  • Advice may prioritize the potential commission over the quality or cost-efficiency of the product being sold

🚀 Quick Tip: Even DIY investors pay hidden fees like bid/ask spreads when trading through discount brokerages for connecting the buyer and seller.

🕒 Hourly & Project-Based Fees

You pay directly for advice, either by the hour or per project.

  • Hourly rates range from $200 – $600+
  • Project fees range from $1,500 – $15,000 depending on complexity

Upsides:

  • Transparent fee, quoted in clear dollar amounts
  • Reduces product bias since advisor doesn’t profit from what you buy or the financial plan says you need
  • Good for one-time advice or planning-only support

⚠️ Downsides:

  • Advisor may be incentivized to bill more hours
  • Often reactive rather than proactive
  • May put the burden on you to initiate contact and implement advice
  • Some clients may avoid asking questions if it means triggering a bill

🔹 Flat Fees (Retainers)

You pay a flat annual fee (billed monthly or quarterly) for ongoing advice and implementation support.

  • Common range: $3,000 – $15,000/year, sometimes with inflation adjustments

✅ Upsides:

  • Transparent and easy to track
  • Great for those without large investment accounts (e.g., business owners, real estate investors)
  • Aligns well with financial planning and tax strategy needs
  • Advisor compensation isn’t tied to what products you buy, how many hours of work the relationship will require or how much you have in your investment accounts

⚠️ Downsides:

  • Fees paid out-of-pocket, which can be difficult for those with tight cash flow or in retirement
  • May not incentivize portfolio performance (advisor earns same fee regardless)
  • Can create friction during periods when you need less hands-on support (what value am I receiving for the fee being paid)

🚀 Quick Tip: Flat fee models often allow more flexibility - like choosing managing your investments on your own, but still getting advice from the financial advisor

📊 Assets Under Management (AUM)

Most common. You pay a percentage of the assets your advisor manages. For example:

  • $1,000,000 portfolio x 1% = $10,000/year in fees
  • Often billed monthly or quarterly

Typical fee range: 0.75% to 1.5%, with discounts at higher asset levels.

✅ Upsides:

  • Paid from your investment account, not out-of-pocket
  • Tax-efficient if paid from retirement accounts (not taxed or penalized)
  • Advisor’s compensation grows with your portfolio, aligning interests in growing your investments under management

⚠️ Downsides:

  • Conflicts arise if advisor recommends investing more just to increase their fee
  • Percentage fees can be confusing to calculate and convert into dollar terms
  • Clients may overpay for services they don’t fully use, especially when all your advisor does is invest your money
  • Fee often bundles many services (planning, investment, tax, estate planning, etc.) into one rate, making it hard to evaluate value
  • Fee calculation methods (like average daily balance) can be hard to follow — needing itemized statements to truly understand

Important Reminder: Low-cost robo-advisors may charge as little as 0.30%, but they often offer limited or no human interaction. They also typically only invest your money with limited value added to areas like financial, tax, estate, business, and insurance planning.

💡 Final Thoughts

Every fee structure has pros and cons. The key is to understand how you’re being charged, whether that fee makes sense for your situation, and if the advisor adds enough value to justify it.

Value doesn’t just mean "beating the market." It means:

  • "Holding you accountable to your goals"
  • "Delivering tax strategies"
  • "Building a plan"
  • "Helping with equity compensation, Social Security, retirement income, and more"

Beware of anyone promising big returns. Instead, look for an advisor focused on what they can control: tax efficiency, planning, cost management, and personalized advice.

👀 What Caught My Eye

A record number of Americans are turning 65 this year. Robinhood Snacks broke this down:

 

"The Sandwich Generation will pay... As retiree numbers climb, so does the number of Americans caring for both their parents and their children. About 1 in 4 U.S. adults supports a parent age 65+ while also raising a child. Straining the situation: U.S. debt is at record highs, and without congressional action, Social Security is on track to be depleted by 2033."

“Our lives begin to end the day we become silent about the things that matter.”— Martin Luther King Jr.

Ready to Take Off?

📩 Have a financial question? Visit The Financial Takeoff and our Ask a Question page.

🚀 Want to explore working together? Schedule your Initial Collaboration meeting to see what’s possible with your financial planning. We look forward to meeting you!

Life is short and time is precious. Thanks for taking yours to read this and I hope to be a part of your Financial Takeoff!

Disclaimer: This is just for informational purposes and should not be used or viewed as tax, legal, or financial advice. Work with your tax professional, legal professional, and financial planner to evaluate which strategies would be the best for your situation.

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