What Are Reasonable Fees For A Financial Advisor?

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To reach your financial target and also to have enough saved for your retirement, it might be advisable to hire the service of a financial advisor. Many years ago, hiring a financial advisor with a low budget might have been impossible, but, in recent times, anyone can readily afford to employ the service of a financial advisor based on their needs. As affordable as the fee of hiring a financial advisor might be, no one wants to pay excess for the service they are receiving from a financial advisor. Most financial advisors will generally work to their own benefit in terms of payment. Therefore, it is always advisable for employers to know why they are hiring a financial advisor and which service they are going to receive to decide the right amount to pay for the service.

On a general note, it is better to work on a fee-based or fee-only payment model with a financial advisor rather than a commission-based or one as there is more openness in payment structure with the previous than the latter. Based on the service, a financial advisor is offering, the ways of charging a customer might vary.

What is the average financial advisor fees based on service?

Robo-advisors

Robo-advisors operate like a robot and provide online-based services that enable you to choose the right investment or select a suitable retirement plan. A Robo-advisor will build your portfolio and monitor them, making use of computer algorithms. They can also offer online planning tools and calculators, but Robo-advisors don’t provide personalised investment or customised financial plans.

The fee structure for Robo-advisors

Robo-advisors charge an average AUM fee range of 0.25% – 0.50%, which implies that on a £50, 000 accounts, they will receive £125 – £250 per annum.

Online financial planning services

This type of financial advisor operates online like the Robo-advisors but offers services like the traditional human, financial advisors. Financial advisors offer services like investment management, customized financial planning, but all services are done online through phone calls or video call meetings. An online financial advisor will provide all services a Robo-advisor will provide you with additional services associated with human, financial advisors.

The fee structure for online financial planning services 

An online financial advisor will charge an AUM fee within the range of 0.30% – 0.89%, a price that might vary based on the service they are offering. But an online financial advisor will charge lesser than a human financial advisor offering the same service. 

Human financial advisors

Human financial advisors are considered as the traditional model of financial advisors. The human financial advisor is more accessible as you get to fix face-to-face meetings with them and can, therefore, get to find out more information about the services you are receiving. A human financial advisor can provide you with any type of service as long as it is with the business world. 

The fee structure for human financial advisors

Human financial advisors, unlike other types of financial advisors, use various fee structures. Some of the typical fee structure includes:

AUM fee: human financial advisor will charge 1% of the asset been managed per year on an average. This price will vary based on the amount been administered. 

Hourly rate: some human financial advisors will charge you on an hourly rate for service they provide you. The financial advisor will cost £200 to £400 per hour on an average 

Fixed Fee: This payment structure paying a specific amount based on the type of service the financial advisor is providing.

Performance fee: this is an additional fee that can be charged by a financial advisor if the investment plan performance exceeds the targeted rate.

In conclusion, the type of service you require from a financial advisor and the type of financial advisor you’ll hire will typically determine the reasonable amount to be paid based on the financial advisor.

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