Average Financial Advisor Fees for 2017 | Full Details on Advisory & Investment Management Fees (Comparison)


Ever since AdvisoryHQ News began publishing its rankings of the best U.S. and U.K. financial advisors and wealth management firms, we have observed a tremendous level of consumer interest in finding average financial advisor fees and investment fees that are charged by investment management, financial advisors, and financial planning firms.

When searching for a top financial advisor or investment manager, some key questions asked by consumers include:

  • What are the average financial advisor fees?
  • What are the average investment management fees in the U.S.?
  • Where to find details on financial planner fees & comparison
  • Where can one find a range of independent financial advisor fees?

We've also noticed that new (and prospective) financial advisors, planners, and investment managers often search for answers to: "How much do financial advisors earn?" And also "What is the annual income for an investment manager?"

This 2016-2017 review of average advisor fees has been published to help answer all of the above questions.

AdvisoryHQ's editorial team has also provided a detailed breakdown with tables and charts of the various financial advisor fees and pricing structures used by wealth managers across America.


Pricing Structures Used By Financial Advisors, Wealth Management and Investment Management to Present Fees to Clients

Before we continue, let's quickly address the standard "fee structure" that is used across the financial advisory and investment industry.

Financial advisors and wealth management firms generally present their fees to clients in the form of a fee structure. A fee structure is a list, an image, or a table that shows a breakdown of a financial advisor or investment management firm's fees.

A fee structure is basically a comparison of what a firm charges each client based on the amount it manages. Financial planners, advisors, and investment managers often publish such fee structures on their websites or on their Form ADV, or as part of their communications with clients.

Below is an example of a fee structure that presents investment management fees (comparison by invested amounts).

Sample Fee Structure

Sample Fees-min

The figures above are examples, and used to illustrate what a fee structure looks like. Please see the sections below for actual figures of average financial planning fees, financial advisor fees, and investment management fees.

Types of Financial Advisory Fee Rates

Before we go further in this review of average financial advisor fees, let’s quickly go over the definitions of the different types of rates presented in this article:

  1. Percentage (%) rate: This is the most common fee structure in the financial advisory and wealth management industry. It involves the process whereby an advisor or investment management firm charges clients a percentage of the assets being managed. In the table above, for example, if you were to give $250,000 to a wealth manager to invest and manage for you, then that advisor would charge you an average of 1.15% of the investment amount each year.
  2. Percentage (%) tiered: Percentage rates are normally tiered based on the amount being managed. On average, investment managers charge reduced fees to clients who invest higher amounts. For example, a wealth management firm might charge you a 1.15% AUM fee if you give them $250,000 to invest on your behalf. But that same investment management firm might charge you a tiered rate of 1.10% for the first $250,000, 0.95% for amounts between $250,001 and $500,000, and 0.85% for amounts over $500,000.
  3. Fixed/flat fees: This is when a financial advisor charges a flat fee for financial advice and planning. For example, a financial planner might charge a flat fee of $1,500 to develop non-complex financial plans and charge $2,200 to develop complex financial plans.
  4. Financial planner – hourly rate: This is when a financial planner, financial advisor, or investment manager charges by the hour for specific services.
  5. Annual rate/retainer: This is when a financial advisor, wealth manager, or financial planner charges an annual retainer.
  6. Hybrid: A mix of different rates for different services provided by the financial advisor.


Typical Wealth Management Fees Presented in This Article

With regards to fees, there are three main types of financial advisory firms: fee-only, fee-based, and commissioned-based. Click here for a definition of the three types.

Based on the near impossibility of identifying, validating, and presenting what could be considered average or typical for commission-based financial advisors, this article is solely focused on presenting average financial advisor fee comparison for fee-only and fee-based financial advisory companies and investment management firms.

List of Average Financial Advisor Fees

  1. Average % fees
  2. Average fixed fees
  3. Average hourly fees
  4. Average annual fees/retainer
  5. Hybrid fee structures

Click any of the links above to jump directly to the specific types of average financial advisor fees that are of interest to you.


Methodology Used to Identify 2016’s Average Financial Advisor Fees

How did the AdvisoryHQ research team determine the average independent financial advisor and investment fees presented in this review article? Click here to jump below and learn more.

__

Average % Fees (Percentage of Asset Under Management)

Charging each client a percentage of the asset being managed, also known as assets under management (AUM), was the original compensation plan for financial advisors, RIAs, and wealth managers, and it’s still the most commonly used investment fee structure today.

This structure is very simple: a client gives a particular amount/asset (for example, $500,000) to an investment manager to invest on his or her behalf. In return, the investment manager charges an annual percentage (for example, 1%) of the assets entrusted to the wealth management firm as income.

The table below presents the average 2016 independent financial advisor fees (comparison) based on % of AUM. These fees were documented based on a random sampling of a wide range of wealth advisors, RIAs, and asset management firms. Click here for additional information on our equal probability of selection sampling approach.


Average Financial Advisor Fees | 2016-2017

Investment Amounts

Average Fees (%)

Annual Averages

$50,000

1.18%

$590

$100,000

1.12%

$1,120

$150,000

1.09%

$1,635

$250,000

1.07%

$2,675

$500,000

1.05%

$5,250

$1,000,000

1.02%

$10,200

$1,500,000

0.94%

$14,100

$2,000,000

0.91%

$18,200

$2,500,000

0.88%

$22,000

$5,000,000

0.84%

$42,000

$7,500,000

0.77%

$57,750

$10,000,000

0.69%

$69,000

$20,000,000

0.65%

$130,000

$30,000,000

0.59%

$177,000

% of Assets Under Management

Average Wealth Manager Fees and Costs 2 - Chart

The financial advisor fee averages presented above correlate with Bloomberg’s Investor Guide to Fees and Expenses report, which shows that clients with “more than $100,000 in investment accounts pay less than 1.12%” annually (on average) in management fees.
 
Less-affluent investors, on the other hand (those with $100,000 or less in account size), typically pay more than 1.12% in fees per year. Clients with about $1,000,000 in invested assets pay around 1%.
 
The average financial advisor fees presented above reflect administrative fees (record keeping, accounting services, trading, etc.) and overall management costs (ongoing due diligence, monitoring, tax management, account rebalancing, and ongoing investment advice and financial planning).

However, the fees above do not cover expenses for any mutual, index, or exchange-traded funds you may own within your account.

According to Bloomberg News, below are additional fees that you might end up paying for mutual/index funds or ETFs within your account.

  • Actively managed mutual funds: 0.65% of the value of the fund per year for bond funds and 0.89 percent for equity funds.
  • Index mutual funds: 0.12% of assets per year for equity funds and 0.11% for bond funds.
  • Exchange-traded funds: 0.5% of assets (average expense ratio for U.S. non-leveraged ETFs).

__


Average Fixed Independent Financial Advisor Fees


In addition to firms that charge by a percentage of assets under management or based on a scaling schedule, there are firms that charge only a flat fee per managed assets.

This fee type is basically when an investment manager charges a fixed fee based on how much assets are being managed on your behalf. The table below presents this year’s overview of fixed fees (per value of asset under management). 

Often times investment management firms would determine their fixed financial advisor fees based on a pre-determined percentage.

Average Fixed Fees (Annual Fees Per AUM)

Average Flat Financial Advisor Fees (Annual Fees)

hourly planner fees average - financial advisor cost


Tiered Financial Advisor Fee Structure


As mentioned above, a lot of investment management firms utilize a tiered “% of AUM” fee structure, where they charge less for higher invested amounts.
 
Investment managers rarely charge the same fee for each dollar of asset that they manage. To encourage investors and high-net-worth clients to invest higher amounts, advisory firms often offer them a tiered rate structure. See the "Financial Advisor Fees" table above.

Below is an example in which a firm like Yeske & Buie (one of AdvisoryHQ’s Top Ranking San Francisco Independent Financial Advisors) charges 1% per year on the first $5M in an account, plus 0.50% per year for amounts between $5M and $10M, plus 0.35% for amounts greater than $10M.

How-Much-Does-a-Financial-Advisor-Cost-min

Source: Yeske & Blue

Below is the fee structure of RTD Financial Advisors, a fiduciary and independent investment advisory firm with a transparent fee structure. The firm charges a flat rate based on the schedule below:

Financial-Planning-Fees-min

Source: RTD    

 __


Average Hourly Financial Planning Rates


Rather than utilizing a tiered investment advisor fee structure or a percentage of AUM wealth management fees comparison structure, some independent financial planners choose to go with a much simpler fee structure: they charge by the hour.

Average hourly financial planner fees range $120-$300 an hour based on the location of the advisor. For example, Financial Connections is a top-rated, flat-fee-based financial advisor in California and the firm has an hourly planner fee of $200 for financial planning advice.

Hourly Financial Planner Fees

http://www.financialconnections.com/images/FeeSchedule.pdf

Hourly planning is ideal if you need:

  • A check-up to determine progress in meeting financial goals
  • A financial plan
  • Putting together an estate plan
  • A second opinion on financial issues
  • A financial planning road map
  • Retirement accumulation strategies
  • Structuring tax strategies
  • Retirement withdrawal strategies
  • Review of investments in a 401(k)
  • Discussing major life changes
  • Investment review for do-it-yourselfers

In addition to location, a firm’s exclusiveness, types of services, and demand for its services may be reflected in a firm’s hourly planner rate. This is the reason why some investment management firms can charge $300 and why other wealth managers and advisors charge a rate that is at the lower end of the spectrum.

At the end of the day, which firm you use would depend on your personal preference, your location, and the services that you seek.

Note: A wealth advisor's fees do not necessarily determine the quality of service provided. Just because a wealth management firm has a $300 per hour financial planning fee does not make it better than a wealth management firm charging $100 or $120 per hour.

__


Average Annual Retainer Financial Planning Rates


In addition to charging an hourly fee (see above), some advisors also charge an annual retainer for specific investing or advisory services.

Average financial planning retainer rates range $6,000-$11,000 a year depending on your location.

Similarly to hourly planning, paying an annual retainer fee is ideal if you need:

  • An annual check-up to determine progress in meeting financial goals
  • Income, gift, and estate tax planning
  • Wealth transfer strategies
  • Putting together an estate plan
  • Income and debt analysis and projections
  • A second opinion on financial issues
  • Income tax return preparation
  • A financial planning road map
  • Retirement accumulation strategies
  • Review of investments in a 401(k)
  • Discussing major life changes
  • Wealth enhancement and protection

 __


Hybrid Fee Structure


A lot of advisors utilize a hybrid financial advisor fee structure, which involves a mix-and-match variation of the percentage of AUM, fixed, tiered, and hourly pricing reflected in this investment management firm fees review.

For example, TrueWealth is a wealth management firm in Atlanta, Georgia, that offers independent, fee-only advice to its clients. The firm’s “financial planning fees” range between $1,500 and $5,000, depending on the complexity of the client’s situation.

The firm charges a different set of fees for its investment management services. These asset management fees are based on a percentage of assets under management and may vary between 0.25% per quarter (for the first $2 million) to 0.125% per quarter (for portfolios in excess of $5 million).

Truewealth -Wealth Management Fees-min

Financial advisor fees-min

Multiple accounts within the same family may be treated in aggregate for fee purposes. A $2,500 minimum quarterly fee usually applies.

http://www.truewealth.com/trueplanning/trueplanning-fees/

Another example is White Horse Advisors, a firm that charges clients a fee based upon the market value of each portfolio. For some services, an additional minimum advisory fee may be applicable.

White Horse Advisors Fee Structure

Average-Financial-Advisor-Fees-min

Investment-Management-Firm-Fees-min


          

Average Financial Advisor Income Per Client (AUM)


Investment Amounts

Average Fees (%)

Annual AUM Income

$50,000

1.18%

$590

$100,000

1.12%

$1,120

$150,000

1.09%

$1,635

$250,000

1.07%

$2,675

$500,000

1.05%

$5,250

$1,000,000

1.02%

$10,200

$1,500,000

0.94%

$14,100

$2,000,000

0.91%

$18,200

$5,000,000

0.84%

$42,000

$7,500,000

0.77%

$57,750

$10,000,000

0.69%

$69,000

$20,000,000

0.65%

$130,000

 
 
Key Considerations: Factors that Would Cause a Specific Firm's Financial Planning Fees or Wealth Management Fees to Divert from the “Average” Fees Listed Above

As mentioned above, a lot of variables go into wealth management, financial advisor, and financial planner fee structures. Your advisor or asset manager might charge a lot more or a lot less than the average financial advisor fee rates presented in this article.

Below are some consideration that determine the specific fees charged by a financial advisor relative to the average financial advisor fees presented in this article:

  • Some financial advisors charge a specific percentage for assets under management. However, these advisors might also provide clients with ongoing financial advice and planning services. These additional services could affect the quoted fees.
  • In addition, a financial advisor’s fees could be much higher than the averages listed here because such an advisor/asset manager might perform highly complex investing strategies with an aim of outperforming the S&P 500. Such strategies normally involve more resources, research, and costs, which are reflected in the higher asset management fees being charged by the advisor.
  • An advisor who merely invests his or her clients’ fund in safe assets (mutual funds, bonds, etc.) might charge a much lower fee than the financial advisor fee averages referenced in this article.

In addition, the size of your portfolio is a key element in determining financial advisor fees and comparison. The higher your account size, the lower investment management fees you should expect to pay.

Wealth Management Account Minimums

As part of their offerings, wealth management firms normally require a minimum account size. Minimum new account size varies widely across the wealth management industry.

Some wealth managers require a $3,000,000 minimum. Others are much lower and only require $150,000.

Online asset managers (i.e., robo-advisors), on average, require an extremely low minimum account size. However, they do not provide the human touch, comprehensive services, and customized relationship approach provided by your regular wealth management firm.

So, depending on the asset manager you choose, you can expect a minimum account size requirement starting from $0 (robo-advisors) and reaching as high as $30,000,000 (highly exclusive wealth managers).

__

Types of Financial Advisory Firms

Across the industry, there are three main types of wealth advisory firms:

  1. Fee-only: These types of advisory firms do not accept any fees or compensation based on product sales. They are compensated solely by their clients. Fee-only advisors have fewer inherent conflicts of interest, and their fee structures might be hourly, include an annual retainer, or be based on a percentage of your investment assets.
  2. Commission-based. This type of advisory firm (e.g., commission-based investment managers) earns commission on the financial products that they sell to their clients.
  3. Fee-based. Such advisors use a fee-only structure for some services, while they earn commissions on other services that they provide. This is known as a fee-based structure.

__

AdvisoryHQ’s Research to Determine Typical Financial Advisor Fees and Averages

How did the AdvisoryHQ research team determine the typical investment management fees and average financial advisor rates presented in this review article?

To determine the average financial services fees across different U.S. states, our research team spent time reviewing a wide range of financial advisor fees. The team looked at typical investment management fees across states in the Eastern, Western, Southern, Midwestern, and Northern regions of the U.S. In addition to location, the team also compared financial advisor fees based on firm sizes, as well as financial planner fees based on financial and retirement planning services.

The team’s objective was to identify the average, median, and typical financial advisor fees charged across the investment and financial planning industry. Please note that it is impossible for the team or any other team/firm to review the fees being charged by every wealth advisor that operates in America.

In determining the “wealth management fees comparison” results presented here, we used a random sampling approach to review financial advisors’ fees across the U.S.

The team’s random sampling approach was based on a fundamental principle called equal probability of selection: when every financial advisor across the U.S. has an equal probability of being selected in a sample, then that sample will be representative of the entire financial advisory population. This is similar to how election polls are conducted today.