Created: July 23, 2020
Modified: September 9, 2022

Episode 9: What Does it Cost to Work With a Financial Advisor?

Thank you for joining me for Episode 9 of my Money Wisdom Question Series, where I film answers to common financial and retirement investment questions in 2 minutes or less. Today, I’m going to answer the question, “What does it cost to work with a financial advisor?” What does it really cost? There are basically three ways a financial advisor or firm earns their money.

  1. Charging an Hourly Fee
  2. Charging a Fee Based on Money Under Management
  3. Receiving a Commission on a Product Sold

Charging an Hourly Fee:

This is very similar to an accountant or an attorney the way they charge fees. If they work for you for an hour, they’re going to charge you whatever the billing rate is in your area. Maybe $300, $500 for an hour.  

Charging a Fee Based on Money Under Management:

The other way is they will manage your money and charge a fee based on money under management. So, if they’re managing a million-dollar portfolio, there’s going to be some kind of a fee based on the size of that portfolio. Typically, a percentage. It might be 1% or so that they’re charging on that portfolio. When you do better, they do better. When you do worse as far as performance, they get a pay cut. It puts you on the same side of the table as the financial advisor as far as performance and incentive. There’s less conflict of interest as far as that goes.  

Receiving a Commission on a Product Sold:

The third way is they will receive a commission on a product that they sell. I’ve been in this business for 30 years and back in the old days a financial planner could sell you a mutual fund and they would get paid by the company; you would never write them a check. But it was built into the particular mutual fund or in the case of insurance, an insurance product.  

Conclusion:

It’s that simple. Three ways. A fee by the hour. A fee based on money management, which is typically a percentage or some type of a commission. Also, some advisors, Johnson Brunetti and other firms, charge you a fee based on the assets under management. But you get many, many other services because of that. Maybe tax planning or estate planning is involved. They might have a team of attorneys or accountants that can help you.  

So, a lot of different ways. Basically, you’re going to pay somewhere around 1% or so, give or take a little bit for that relationship. Or I should say, that’s what the financial advisor is getting paid. It’s either going to be very transparent or you’re going to kind of wonder where that fee is, but you know it’s built in.

Thanks for joining me and I hope you found this information helpful!

P.S. If you enjoyed this topic and you want to hear more, you’ll love this podcast episode I recorded where I talk about a similar subject.

P.P.S. Feel free to submit questions here for a chance to have them answered!

  • Sandy and Thomas C.
    Sandy & Thomas C. are clients of Johnson Brunetti and received no compensation for their statement.

    “We always felt our financial needs were in very capable hands. Alex Angst is great to work with. Our advisor always made us feel he had our best interests at heart and explained things so we could understand them.”

  • Robert G.
    Robert G. is a client of Johnson Brunetti and received no compensation for his statement.

    “We’ve been clients of Johnson-Brunetti for > 10 years. We’re enjoying a comfortable retirement as a result. Many thanks to Joel and our CFP, Eric Hogarth. I wish we had plugged into this decade approach back when we were in our 30s.”

  • Lisa D.
    Lisa D. is a client of Johnson Brunetti and received no compensation for her statement.

    “Working with Johnson Brunetti has had a positive impact on my life by providing me with the knowledge, confidence, and peace of mind to move forward with my retirement plans. The process of getting to this point, through their guidance, has been informative and pleasurable.”

  • Ken D.
    Ken D. is a client of Johnson Brunetti and received no compensation for his statement.

    “I view your company as one that puts my interests first. I think that is very uncommon and very refreshing. “

  • Jeanne P.
    Jeanne P. is a client of Johnson Brunetti and received no compensation for her statement.

    “Matt does an awesome job! So easy to understand and he listens to our concerns and addresses them! happy I chose your firm!”

  • Anonymous
    This testimonial was provided by a client of Johnson Brunetti and received no compensation for their statement.

    “I have been pleased with the help and service I have received from the company. I have met several team members on Eric’s team and have found all of them very well prepared to meet with me when reviewing my portfolio. I always feel that I am an important customer and appreciate that very much. I hope the firm continues to focus on the customer and maintains its great service. I think you do a great job for someone like me!!!! I’m happy I chose your firm!”

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