Many people want to know if it is worthwhile to get a financial advisor. Generally speaking, unless you are truly interested in creating and making financial projects and capable of managing your investment without the intervening of your emotion, you probably need a helper when necessary. In that case, it seems that most people would have a financial advisor in one way or another.
However, we have to acknowledge that financial advisors can be expensive, which means you will have to take a careful analysis before you decide to hire one.
Most financial advisors charge the fee depending on how much money they will manage for you. This includes a fee structure called Assets Under Management (AUM). Typically, the advisors will charge 0.25%-1% of the client’s balance annually. The specific rate depends on the size of the balance. For instance, a customer investing $50,000 with an advisor who charges a 1% management fee will pay $500 a year, whereas a client having $500,000 invested with the same advisor will have to pay $5,000 annually. Therefore, If you have a relatively small amount of asset, choose an advisor who charges with AUM can be a better choice.
Some advisors may charge flat annual fees without considering the asset level, which can cost about $2,000 to $7,500 per year. If you are worried that your asset can cost you too much for financial planning, it may be wise to consider selecting this type. Others may have a set hourly fee ranging from $200 to $400 per hour. If you are planning for the kid’s college, getting a workable budget, or seeking for a full financial plan, you may have a try on this one. Besides, there are some advisors who are compensated through commissions based on the investments they recommend. In that case, the cost can vary from about 3% to 6% of the investment. Usually we do not recommend commission-based financial advisors because you are likely to get swayed without receiving the best investment plan.
Since there are no normal or absolutely fixed fees for getting a financial advisor, you are encouraged to look for the type that best suits your own needs.