What is the cost of a financial advisor?

Happy Monday everyone! I have touched on the topic of utilizing a financial advisor vs doing your own investing in the past. As I’ve also shared, I have a few avenues myself utilizing two financial advisors/institutions (each managing about 25% of my total portfolio) and myself doing the last 50% through a trading platform.

If you are using a financial advisor…do you know what you’re paying them to manage your portfolio? Here are some common fee structures:

• Assets Under Management (AUM): The advisor takes a percentage of the total assets they manage, typically 0.75% to 1.5% annually. A $500,000 portfolio often costs $3,750–$7,500 per year.
• Hourly Rate: Generally costs $150 to $500 per hour, suitable for specific, one-time advice.
• Flat Fee / Retainer: A set annual fee for comprehensive planning, usually ranging from $2,000 to $9,200.
• Project-Based: A one-time fee for a specific plan, such as retirement or estate planning, averaging $1,500–$5,000.
• Commission-Based: Advisors are paid via commissions from investment products sold, usually 3% to 6% of transactions.

Here is my #1 suggestion if you are using them: Look at your statements and see what type of return they have gotten you annually and then adjust based on the fee you are paying. Are they averaging more than 7-8% annually after it’s all said and done? Are you doing some of you own investing through a trading platform (Etrade, Robinhood, Fidelity, Vanguard, etc) and giving yourself a better return without any annual fees? You realize after awhile you can just see where the financial advisors have put your money and you can do the same thing.

Once again, you may not have the time or interest to manage your own money (I don’t understand that but I get that it happens) and the financial advisor/institution is the way to go for you. And if you have money in these institutions, I’m not saying to pull it all out of there and start doing it yourself. But if you can take $10 or $20 or whatever each month and start investing yourself on the side….you just may surprise yourself how well you can do.