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How Much Does a Financial Advisor Cost?

You’ve worked hard, saved wisely and now it’s time to invest your cash. Handing your hard-earned dollars to a financial advisor seems like the next step, but how much does a financial advisor cost? The total price tag may surprise you.

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Factors that Go Into Financial Advisor Fees

Let’s assume your financial professional is acting as a fiduciary. Your financial advisor charges you a management fee that is some percent of your account per year. A 25-year-old individual planning to give $40,000 to an advisor annualizing a return of 7.5% until the client is 65 would end up paying the advisor $74,094.43 in fees. You can see a breakdown of this in the first table listed below. Many assumptions are made here, and the total lifetime cost of a financial advisor can vary widely given various assumptions. Here are some other scenarios showing the lifetime cost of a financial advisor:

                       

                       

Some of these scenarios assume larger amounts of initial investments, different investment time frames and alternate rates of return. These calculations do not consider trading fees, account maintenance fees or any other costs to your account. Regardless, you can see the cost of a financial advisor compounds itself just as your account does when growing through investments.

Does this mean financial advisors are not worth the money, and there for your time? Not exactly. The answer is, it depends. It depends on you as an individual and what your objectives are as an investor. To quantify an advisor’s value, Vanguard compiled a study. Vanguard’s conclusion of this study was that the majority of a financial advisor’s value comes in the form of behavioral coaching, or advisor guidance. More than portfolio construction or wealth management, the greatest thing an advisor can do for you is to help regulate potentially harmful monetary decisions.

Finding Affordable Financial Advisors

If you have no desire to self-manage your own portfolio, an investment advisor may be for you. If you feel you can benefit from better financial decision making, a financial advisor may help you get on the right track. For others looking for an alternative to the high cost of a financial professional, you can turn to Hedgehog Investment Research. Our models are back-tested proven strategies to compete with the market while trading less than twice a year on average. Let us help you keep it simple. Sign up today for a 7-day free trial!