How Much Money Do I Need To Hire A Financial Advisor?

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My first experience with a financial advisor was in the early 1980’s, and he was a stockbroker. The minimum to hire a financial planner and invest was a few thousand dollars. The financial advisor got paid by commission. When I bought the mutual funds he recommended, he received a commission. There was a conflict of interest as he was financially motivated to sell me high commission funds, and there were no ETFs or the Fiduciary Rule,¹ which mandates that the advisor acts in the best interest of the client. Needless to say, the stockbroker sold me high commission products. But I learned a valuable lesson.

Before investing, understand “How much financial planners charge,” and how they get paid.

This article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.

When to Get a Financial Planner?

If you’re wondering, “What net worth should I have before getting a financial advisor?” you’ll get answers and options.

You might want to get a financial planner when you need help investing your money. For example, during the following situations, hiring a financial planner might make sense.

When to hire a financial advisor:

You come into a financial windfall
You’re getting married or divorced
You’re adding to your family
You have a high income and net worth
You’re retiring

Click below if you’re near retirement and searching for an affordable financial advisor:

Financial planners come in a variety of forms, with many types of education and certification levels. Financial consultants, planners, advisors, wealth managers and robo-advisors may be considered financial planners. Their level of service and costs vary.

For example, Empower offers free financial tools for self-directed investors to manage their own investment portfolios. Once your assets reach $100,000 you can hire Empower for 0.89% of the AUM (assets under management) to manage your investments and speak with a financial advisor for guidance. When your wealth increases, they provide additional services like legal and tax planning, as well as a sliding scale which lowers fees for those with greater assets.

When considering, “At what net worth should I get a financial advisor?” understand that most financial advisors require a minimum between $25,000 up to $500,000 or more. The financial advisor will typically meet with you in person or video chat and require that you enable limited trading ability to them so that the advisor can make financial decisions for you.

Don’t worry if you lack $25,000, we provide affordable financial planner ideas.

For those with less than $25,000, there are robo-advisors who can manage your money for free or for a low fee. Some offer access to financial advisors for reduced hourly fees. Ellevest and Betterment are low fee robo advisors, with discounted financial advisory access. Wealthfront offers one of the best digital investment managers. Their digital financial advisor is programmed to answer more than 10,000 questions and compares favorably with a human planner. If you use the link below, you may be eligible for free cash promo.

If you have access to a 401K at work, you can sometimes get free financial advice. The 401k or 403b plan administrators can help you invest your retirement money contributions.

How Much Does A Financial Advisor Cost?

Find out how much it costs to hire a financial planner and understand that the financial planner cost is based on various factors.

Following are common ways financial planners charge:

Percent of AUM – The average fee for financial advisors is one percent of assets under management. If you have $100,000 managed by a financial advisor, the one percent fee will be $1,000 per year. This is usually deducted quarterly by the management company. As your assets grow, the AUM percent frequently declines. Retirable is a unique low fee financial advisory firm designed for those within 10 years of retirement or older.
Fee per hour – If you just have a few questions and don’t need anyone to manage your money, you can hire an hourly financial advisor. The fees are typically several hundred dollars per hour.
Fee per service – If you’re seeking someone to set up an investment plan or financial plan for you, then a fee per service financial advisor might be for you. That way you’re only paying for the services that you need. You might pay a one time fee of $1,000+ for a financial and/or investment plan.
Free or low fee robo-advisor – Robo advisors, frequently considered digital investment managers, may offer human or digital financial advisors as well. Their fee structures range from free to 0.75% AUM. Some robo-advisors have low monthly fees in lieu of an AUM fee structure. Fidelity Go offers free digital investment management for users with up to $25,000. Account balances above $25,000 pay 0.35% AUM and get access to digital investment management and financial coaches.

The only way to find out how much financial planners cost is to ask. Before hiring a financial planner, ask about their fee structure. Costs vary among financial planning alternatives. And don’t be afraid to ask for a fee reduction or discount!

How to Choose a Financial Planner

Once you’ve decided that you need a financial planer, follow these steps to choose the best financial advisor for you.

Determine your financial needs – Decide whether you want ongoing investment management or occasional financial advisory guidance. Consider whether you prefer access to live financial advisors or if digital advice is enough.
Learn about financial advisor designations – The three most popular and highly regarded financial advisory credentials are; Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) and Personal Finance Specialist (PFS). Each of these credentials requires extensive study and the completion of one or more exams. Other financial advisory designations are listed on the Finra website.
Consider your budget and how much you are willing to pay in fees – If you are a self-directed investor, you may want to study and learn how to invest on your own. For financial questions, hire a financial professional on an hourly or fee per service basis. If you have fewer assets, you might be fine with a low cost robo-advisor.
Interview several financial advisors – Speak with more than one financial advisor to determine which one best fits your needs. Read reviews of robo-advisors and investigate their websites to evaluate whether a digital or digital plus human advisor works for you.
Go to Brokercheck² to investigate the financial advisors’ credentials – Input the financial advisors name, firm name and zip code to determine whether there are any legal claims made against the advisor.

Financial Advisor Alternatives

Learning how to set up a basic investment portfolio is quite easy. In fact, many professionals such as Richard Ferri of Core-4³ and Vanguard’s Digital Advisor⁴ believe that you can invest with only three to four diversified funds. We also offer quite a few basic investing articles on this website including the best lazy investing strategy.

Invest in a life-cycle or target date retirement fund. Some investment funds provide all-in-one complete portfolio management, and adjust as you reach your retirement age. Target date funds are great not only for retirement but also for near term goals. Pick the date when you expect to start withdrawing the cash, either for retirement, college, home down payment, or other goal. The fund will include a diversified mix of stocks and bonds that automatically becomes more conservative as your withdrawal date arrives.

Invest with a low fee robo-advisor, as mentioned above. You’ll receive a free or low cost diversified investment portfolio based upon your life and financial goals. The digital investment manager rebalances your assets to make sure they continue to align with your goals.

Use free or low fee online investment management services. Online investment planners such as Morningstar’s portfolio x-ray or Empower’s free investment management tools can provide guidance on your investment portfolio to ensure that it is well diversified and in line with your goals. Quicken can also evaluate your asset allocation, and recommend an asset mix in line with your financial goals. The caveat with these tools are that you’ll need to set up an existing portfolio first.

Trusted financial books and websites can offer a wealth of investment guidance. Two of my favorite investment books are the 100 page “Elements of Investing,” by Ellis and Malkiel and “A Random Walk Down Wall Street” by Malkiel. In my opinion these are the best investing and personal finance websites.

When to Get a Financial Advisor – Wrap up?

Should I hire a financial advisor?

How much money do you need to hire a financial advisor?

If you’re still unsure of whether you have enough money to hire a financial advisor and whether you need one or not, here are final things to consider.

Examine your personal situation. Understand what a financial advisor can and can’t do for you. Consider the financial advisory solution pricing structures.

If you have no interest in managing your own investments and are seeking a low-cost financial advisor solution, then choose a target date fund or robo-advisor, regardless of your net worth. If you have a workplace retirement fund, the default option is frequently a target date fund.

If you have $50,000 on up, you have many options, including interviewing and selecting a financial advisor, seeking fee for service or an hourly financial advisor.

There isn’t a cookie cutter answer to how much money you’ll need to hire a financial planner or whether you need to hire a financial advisor or not. Handling your money is not a task you can hand over to someone else and then forget about it. You’ll still need to understand what the advisor is doing with your money. Like any profession that you hire, you’ll need to monitor their activities and ensure they are in line with your expectations.

Like so many other decisions in life, the answer to the question: “Should I hire a financial advisor?“ is nuanced. Ultimately, the answer is, “It depends”.

Personally, I believe that most moderately intelligent individuals can manage their own investments with a small amount of study and a few hours per quarter of portfolio management. Yet, for some, the confidence of having an advisor close at hand may be the right choice.

Sources

Fiduciary Responsibilities | U.S. Department of Labor (dol.gov)
https://brokercheck.finra.org/
https://core-4.com/
https://investor.vanguard.com/advice/robo-advisor

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.

Empower compensates Barbara Friedberg Personal Finance for new leads. Barbara Friedberg Personal Finance is not an investment client of Empower.