Is a Financial Advisor Worth It?

According to a report by Fidelity.com, a financial advisor can add between 1.5% and 4% to your assets under management (AUM) over time (which varies depending on the measures used), and cost between .5 and 1.2%. 

According to Advisory HQ News Corp, the average AUM fee for a $50,000 account was about 1.18% or $590/yr in 2021. For an AUM of $1 million, the fee in 2021 was 1.02%, or $10,200/yr. Most people use an estimate of 1% for a fee when shopping for an experienced advisor.

Is It Worth Paying a Financial Advisor 1%? If you’re already working with an advisor for 1%, look at what they’ve helped you accomplish. For example, if they’ve helped you to earn a 12% return for five years, then 1% may be a bargain. On the other hand, if the return has been 6% or even a loss, you may want to evaluate if you could have done better yourself.

An Alternative to 1%: Instead of paying for an AUM advisor, you might get what you need by hiring a financial advisor to prepare a plan and then manage it periodically. For example, an advisor may charge $2,000 for a comprehensive financial plan and then $200 per hour for help implementing it. This can be a good way to go if you have a simple portfolio (not a lot of properties, limited stock portfolio, etc.). If you go this route, choose someone who has fantastic reviews and credentials. 

Hourly consulting: If you aren't ready for a fully managed account, then I recommend hiring an advisor that charges by the hour, but not the cheapest or entry level advisor. $500 or even $1,000 spent on an experienced advisor can easily pay you back a hundred times. If you know someone who could use this service, it could be a great gift.