How Much Should I Pay for Financial Advice?
Updated: Feb 24
When the source is right, financial advice can make a huge difference in your life. Personal goals may be easy enough to set, but achieving them is a whole other story. As many people try to chart their paths to profit, they find that it's a bit more difficult than they would have imagined. Much of this can be chalked up to a lack of experience or understanding where assets and the rest of the financial sector are concerned.
To this end, it may appear more feasible to bring a financial advisor in Pittsburgh PA into the mix. Certainly, the level of qualifications and experience is likely to make a huge difference in your portfolio. However, as you make this consideration, you may find yourself asking the age-old question, “how much should I pay for financial advice?”
How much should I pay for financial advice?
From an objective standpoint, it's not the kind of thing that has a single flat fee. A part of it is the advisor that you choose, while another part is the perceived value that you derive from the information you acquire. Some advisors can even make decisions and act on your behalf.
If you want a general approximation, there is typically an upfront cost of $1,500 to $2,500 that is required for the initial creation of the financial plan.
Thereafter, you may likely incur an Asset Under Management (AUM) charge of between 0.25% and 5% of the total depending on the size of your portfolio, which is a reasonable percentage to pay.
It's also important to bear in mind that different advisors have different fee structures. So, you may have the fee-only advisor type that is only able to earn from AUM revenue, as well as hourly or project-based charges.
There are commission-based advisors who are paid based on their ability to get clients to move on the business’ investment products. Finally, there are fee-based advisors who are a combination of the two.
All this information can make it appear incredibly challenging to understand what you are going to have to pay for and what the total cost is going to look like, especially if you are unsure how to tell if they are doing a good job.
However, it's recommended that you get the required insights before you put any pen to paper. To this end, you want to have your financial advisor explain the retainer, as well as any other fees that may be associated with the investment you choose. Mutual funds are an example, as they tend to have an associated cost that’s specific to the investment type.
How to Reduce Your Spend
If you are asking the question of how much you should pay for financial advice, then you are likely looking to minimize the said payment. The fees and expenses that come with the industry are mostly reducible, considering you're taking the right steps.
The first of these is ensuring you hire A fee-based advisor. This is down to the motivation that the set advisor has to grow your portfolio. A commission-based financial advisor is motivated by the number of products that clients can purchase. Therefore, the push is going to be to get you to buy more, as opposed to growing what you already have.
Remember that the growth means a bigger paycheck for the advisor when the fee-based compensation package is used. So, the incentive to help you grow your assets lies there.
You may also want to consider going to the online route for financial advice. There are different forms, ranging from c to a great mix with greater human involvement. The allure of going this route is the lower fee structure that often runs well below the 1% range.
Negotiation is another strategy that you can use, which may not immediately come to mind. It's not easy to pull this off, especially since the advisor is going to need to see the value in taking you on as a client for a comparatively lower revenue than the norm. Potentially bringing in more money than is typically managed may work as a solid incentive.
What about having a newer advisor manage your assets. The lack of experience means an inability to demand top dollar rates for the services that they provide. In fact, if you are going the negotiation route, your success rate with newer financial advisors is likely going to be a lot higher than it would be with veterans.