5 Strategies to Lower Financial Advisor Fees

Working with a financial advisor can help you build a long-term financial strategy, but advisor fees can vary depending on the services provided and how the advisor is compensated. Understanding fee structures and comparing your options may help you manage costs while still getting the guidance you need. These strategies can help reduce advisory expenses and keep more of your money working toward your financial goals.

Choosing the right financial advisor often comes down to finding someone whose services and fee structure align with your financial priorities.

Average Financial Advisor Fees

The average fee for financial advisors is normally around 1% of assets under management (AUM). ¹ As you invest more assets, your advisor may lower their fee.

If you have made the decision to work with a financial advisor, it’s important to do your research about advisor costs. Some financial advisors offer services that cost more than others, and within those costs, advisor fees vary.

The average advisor fee can act as a baseline when choosing an advisor within your budget. If you don’t know average costs, you risk spending more for an advisor than necessary.

According to data from Kitces.com, the median financial advisor fee, based on assets under management, varies depending on your total holdings. ²

Types of Financial Advisor Fees

There are several types of financial advisor fees that are important to understand.

• Hourly fees. Hourly fees are generally charged for financial planners. Some advisors, however, charge hourly fees for investing services.
• Asset-based fees. Asset-based fees are one of the most common fee structures for financial advisors. Clients are charged annually as a percentage of assets under management.
• Flat fees. Flat fees are also common for advisors to charge for a service. Meanwhile, some advisors also earn commissions for selling insurance or equities.
• Fee-only. Fee-only payment structures refer to those in which advisors don’t work off any commission or compensation driven by sales. Their services can be modified at their discretion, and fees range from hourly to project-based.

5 Strategies to Lower Financial Advisor Fees

There are several ways to lower your financial advisor fees.

• Do your research. Find an advisor whose fees and services are right for you. Every advisor doesn’t offer the same services, and fees vary, so it pays to know what you’re getting into.
• Consider how your advisor is paid. Check the advisors’ disclosures and Form ADV for the entire pay structure. It will also outline the rules and guidelines that your advisor must follow, as set by the Securities and Exchange Commission (SEC).
• Hire a robo-advisor. With their digital service, robo-advisors can be a cost-effective resource. The best robo-advisors have low fees or no minimum requirements.
• Negotiate with your advisor. Your advisor may be willing to meet you at the negotiating table. It’s not a guarantee, but an advisor may be willing to work with you on cost to maintain you as a client.
• Hire a new advisor. Hiring an advisor who has just started in the field may be less expensive. However, it’s important to note that experience matters. Don’t hire a new advisor just because you think it will be cheaper.

When Paying Higher Advisor Fees May Be Worth It

Not every financial situation calls for the lowest-cost option.

There are circumstances where paying more for an advisor’s expertise may be worth it. You could end up saving significantly more than the fee itself.

Tax planning across multiple account types, for example, requires an advisor who can model the interaction between RMDs, Social Security, Roth conversions and Medicare premiums. Getting that wrong over a decade of retirement can cost significantly more than a higher annual fee.

The same applies to estate planning. The difference between a well-structured and a poorly structured plan can affect how much your heirs actually receive.

Business owners approaching a sale, individuals receiving a large inheritance and anyone navigating a liquidity event often benefit from advisors with specialized experience. The complexity and the stakes justify a higher cost in a way that routine portfolio management might not.

The question to ask is not whether the fee is low but whether the advisor’s value exceeds what you are paying. A 1% fee on a well-managed, tax-efficient portfolio may cost less in real terms than a 0.5% fee on one that is not.

Bottom Line

Advisor fees are not fixed, and you have more leverage than you might think. Fee structures range from hourly and flat-fee arrangements to asset-based percentages. The right fit depends on what you actually need.

Before committing to any advisor, review their Form ADV, ask them directly about their compensation model and compare that to what you get for the cost. In some situations, negotiating or switching advisors makes sense. In others, paying a higher fee for specialized expertise will save you more in the long run.

The goal is not the lowest fee. It is the best outcome for what you are paying.

Tips for Finding a Financial Advisor

• Need help finding a financial advisor or financial planner? Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Interview at least three potential candidates before picking one. You may be inclined to settle for the first advisor you talk to. But do your due diligence and ask about their fee structures, rates, professional credentials and investing philosophy. Also, make sure they are under registration with the SEC and abide by fiduciary duty.

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