How Much Does a Financial Advisor Cost?

The short answer: somewhere between nothing and several thousand dollars per year, depending on how you're paying and what you're paying for.

The longer answer requires understanding that "financial advisor" covers at least four different compensation models, each with different incentives. The fee you pay matters less than how that fee shapes the advice you receive.

The Four Ways Advisors Get Paid

Commission-based. The advisor earns money when you buy or sell investments. This is the traditional brokerage model. You might pay nothing explicitly, but the cost is embedded in the products—mutual funds with sales loads, annuities with surrender charges, insurance policies with built-in commissions. The problem isn't that these advisors are bad people. The problem is that they get paid more when you trade more, and when you buy certain products over others. Dan Goldie and Gordon Murray put it directly: "A broker is working for his firm. An independent fee-only advisor is working for you."

Fee-based (hybrid). The advisor charges a fee but also earns commissions on some products. This is increasingly common and increasingly confusing. The "fee" part sounds like alignment with your interests. The commission part means they may still have incentives to recommend certain products. Ask specifically: "Do you receive any compensation from the products you recommend?" If yes, you're in this category.

Assets under management (AUM). The advisor charges a percentage of the assets they manage for you—typically between 0.5% and 1.5% annually. On a $1 million portfolio, that's $5,000 to $15,000 per year. The incentive is straightforward: your portfolio grows, the advisor earns more. Your portfolio shrinks, the advisor earns less. This aligns interests around growth, though critics point out it also means the advisor gets paid the same whether they're working hard for you or not.

Flat fee or hourly. The advisor charges a fixed amount—either per project ($1,000-$5,000 for a financial plan) or per hour ($150-$400). This is the most transparent model and often the best fit for people who want advice but prefer to manage their own investments. No ongoing relationship, no percentage of assets, just a transaction for expertise.

What Do the Percentages Actually Mean?

The industry standard for AUM fees hovers around 1% for portfolios under $1 million, often declining as assets increase. Here's what that looks like in dollars:

• $500,000 portfolio at 1.25% = $6,250/year
• $1,000,000 portfolio at 1.00% = $10,000/year
• $2,000,000 portfolio at 0.85% = $17,000/year

These are real numbers. Over 20 years, a $1 million portfolio with an annual 1% fee will pay around $200,000 in fees if the portfolio doesn’t grow. With moderate growth (around 3% per year) fees may total roughly $270,000, and with higher growth (e.g. around 5% per year) cumulative fees can exceed $300,000.

The question is what you get in return.

Fiduciary vs. Suitability

This distinction matters more than most people realize.

Brokers operate under a "suitability" standard. They must recommend investments that are suitable for you—meaning appropriate given your age, income, and goals. But suitable doesn't mean best. A mutual fund with a 5% sales load might be "suitable" even if an identical fund with no load exists.

Registered Investment Advisors (RIAs) operate under a "fiduciary" standard. They are legally required to act in your best interest. Goldie and Murray explain: "Independent, fee-only advisors are always legally required to act as fiduciaries to their clients. This means that they must put their clients' interests first."

This is a legal obligation, not a marketing promise. If you're working with someone, ask: "Are you a fiduciary? All the time, or only sometimes?" Some advisors wear both hats depending on which account they're managing.

What's Included in the Fee

This varies enormously. Some AUM fees cover only investment management—picking funds, rebalancing quarterly, sending statements. Others bundle financial planning, tax strategy, retirement projections, estate coordination. According to the 2025 Schwab RIA Benchmarking Study, 84% of advisory firms now include financial planning in their AUM fee.

Before comparing fees, compare scope. A 1.25% fee that includes comprehensive planning may cost less than a 0.75% fee plus $3,000 for a separate financial plan plus hourly charges for tax questions.

Or it may not. Get the details in writing.

When You Don't Need an Advisor

Some people genuinely don't.

If your financial situation is straightforward—steady income, employer 401(k), no complex tax situation, no concentrated stock positions, no imminent retirement—you can likely manage with low-cost index funds and a good book or two. The Bogleheads community has helped millions of people do exactly this.

If you have the discipline to rebalance annually, ignore market noise, and avoid panic selling during crashes, you'll save the advisory fee and probably do fine. The catch is that most people overestimate their discipline. The data on investor behavior suggests the average person underperforms their own investments by several percentage points annually—not from picking bad funds, but from buying high and selling low.

Whether that describes you is something only you can answer honestly.

How to Find What Advisors Charge

Every RIA is required to file a Form ADV with the SEC, which includes their fee schedule. You can look up any advisor at adviserinfo.sec.gov. Part 2A of the ADV—called the "brochure"—lists fees, services, conflicts of interest, and disciplinary history. Read it before your first meeting.

For brokers, FINRA's BrokerCheck (brokercheck.finra.org) shows employment history and any regulatory actions. It won't show commission schedules—those are disclosed in product prospectuses, which no one reads.

The transparency gap between these two worlds tells you something.