Ask ten financial advisors what they charge, and you may get ten different answers. While there is no industry standard for fees, the more layers of fees, commissions, and hidden costs stacked on top of each other, the harder it is for you to know what you’re actually paying.
The short answer: most financial advisors charge between 0.25% and 2% of assets under management annually. The real answer is more complicated and depends entirely on how your advisor gets paid and what types of investments are used in your portfolio. That distinction matters more than almost anything else in the relationship.
The Three Ways Financial Advisors Get Paid
Before you can evaluate cost, you need to understand structure. Nearly every advisor fee falls into one of three buckets.
1. Assets Under Management (AUM) Fees
This is the most common model. You pay a percentage of the assets your advisor manages, typically billed directly from your account. Rates usually range from 0.50% to 1.50% annually, often on a sliding scale that decreases as your account grows.
An AUM fee sounds simple, and it can be. But it’s worth asking a follow-up question: what exactly is included? Some advisors charge their AUM fee purely for investment management. Others bundle financial planning, tax coordination, and ongoing advice. The number on the fee schedule doesn’t always tell you what you’re getting for it.
2. Commissions
Commission-based advisors are paid by the companies whose products they sell, which may include funds, insurance companies, and private investment policies. You may not see a bill, which is exactly the problem. The cost is embedded in the product, and it can be significant but not transparent. Annuities and non-traded investments, in particular, can carry commissions of 5% or more, along with ongoing costs that are difficult to unwind if you change your mind.
The commission model creates an obvious conflict: the advisor is incentivized to recommend whatever pays them the most, not necessarily what serves you best.
3. Flat Fees and Hourly Rates
Some advisors charge a flat annual retainer or an hourly rate for advice, independent of how much money you have. This model can work well for people who want planning advice without ongoing investment management, though it’s less common for full-service wealth management relationships.
What “Fee-Only” Actually Means (And Why It’s Different From “Fee-Based”)
Here’s where it starts to get confusing, sometimes deliberately. “Fee-only” and “fee-based” sound like they mean the same thing. They don’t.
A fee-only advisor is compensated exclusively by fees paid directly by clients—no third-party commissions, no kickbacks from product sponsors, no third-party remuneration of any kind. We are fee-only advisors, which means our only incentive is to act in your best interest, because it’s the only way we get paid.
A fee-based advisor, by contrast, can charge you a fee and still collect commissions on the side. It’s a hybrid model, and it’s often marketed in a way that implies the same conflict-free standard as fee-only, without actually delivering it. If you’re evaluating advisors, this single word “only” versus “based”—is worth asking about directly.
What Should You Expect to Pay?
For a fee-only advisor managing a diversified portfolio, a reasonable range (as commonly cited industry fee benchmarks) is:
- 0.60% to 1.25% annually for portfolios under $1 million
- 0.50% to 0.85% annually for portfolios between $1 million and $5 million
- Below 0.50% for larger portfolios, where scale allows for lower rates
These figures should typically include ongoing financial planning, tax-efficient investing strategies, and access to your advisor when questions come up—not just trade execution. If a fee schedule looks cheap but only covers investment management, ask what else is available and at what cost.