You might be considering looking for a financial planning service to assist you with estate preparation, retirement planning, college savings for children, and other tasks. So, the next question is, how much does financial planning cost?
In this article, let’s explore the average financial planner cost to make the best choice for your hiring decision.
What Is Financial Planning?
Financial planning is a comprehensive process that entails analyzing your financial circumstances and developing a customized strategy to achieve your objectives. This service provides various subjects, including retirement, insurance, taxes, investment, estate planning, and more, which can be included in personal financial planning. Financial planning can include the following services:
- Education financing
- Cash flow analysis
- Budget evaluation
- Life insurance needs
- Savings analysis
- Retirement spending and distribution analysis
- Estate planning
- Tax planning
- Financial analysis
- Stock options planning
- Employee benefits review
- 401(k) evaluation
Depending on the individual, a financial planner may provide various services. Ask about their credentials, the kinds of customers they generally assist, and whether they receive commissions for endorsing particular products or services to ensure you choose a planner who suits your needs.
See more: Financial Planning vs Wealth Management: 6 Key Differences
How Much Does Financial Planning Cost?
The comprehensive financial planning cost depends on various factors, such as your needs, the frequency of those services, the types of planners, and their fee structure.
In this part, we will analyze the financial planner cost of 3 common types of planners: in-person financial planners, robo-advisor, and online comprehensive financial planning.
An In-Person Financial Planner
A conventional, in-person financial planner typically manages your investments and collaborates with you to create a financial plan that covers retirement planning, debt repayment, and insurance coverage. They may meet with you in person, but many will collaborate over the phone or via video conference.
Data from AdvisoryHQ for 2021 show that the average fee for a financial advisor who bills based on AUM ranges from 0.59% to 1.18%. AdvisoryHQ gathers data from CFPs, wealth advisors, and asset management companies. Here are the typical annual percentages depending on the assets under management:
Robo-Advisor
A robo-advisor is a computerized tool that assists you in building an investment portfolio. As the name implies, it serves more as an advisor than a planner, yet it may be helpful for some people.
According to Business Insider’s research, the average cost for a robo-advisor that charges by AUM is 0.40% annually. For robo-advisors that charge flat fees, the average price is $4.09 monthly or $49.08 annually.
While a robo-advisor can be a helpful tool for determining your risk tolerance and investing, if you want to develop a comprehensive financial plan, you might prefer to work with an in-person planner.
Online Financial Planning
Online personal financial planning is comparable to robo-advising but a bit more robust. You can communicate via live chat or video chat and have access to real-time specialists.
Business Insider looked at the same list of 23 robo-advisors to determine the typical cost of online financial advice. They whittled down the list to 11 businesses that provided online comprehensive financial planning and discovered that companies that use AUM typically charge a 0.53% annual fee. For flat fees, the average cost is $151.66 annually or $12.64 per month.
See more: How To Start A Financial Planning Business?
What Are The 4 Types of Financial Planner Fees Structures?
Assets Under Management (AUM)
The financial planner fees based on a percentage of assets under management are the most typical form of payment for portfolio management by a financial planner. Ongoing business financial planning and asset management are part of the comprehensive wealth management services that some businesses and advisors provide. Your wealth management fee as a client will be determined by a portion of the assets you have under management.
The industry benchmark for asset-centric fees is frequently one percent. According to the Kitces survey, which gathered responses from over 800 financial advisors, the median financial planner costs were 1% of AUM for assets up to $1 million. This implies that an individual with a $1 million account with an advisor will pay $10,000 in financial advice fees yearly. The average annual advising fee was determined to be 0.96% cheaper in a 2019 RIA in a Box research.
Work Rate
Numerous financial planning specialists charge their services by hour, month, or project. For instance, you might hire a planner for $500 per hour to meet with you once or twice. Regardless of how long it takes, a planner could bill $1,500 for a job. Depending on your demands, another might charge you $2,000 to $4,000 annually to work with you continuously.
Commissions
The business financial planning advisor receives a commission for the investment products you purchase, such as mutual funds and annuities. They can also receive a commission if you buy insurance plans from them. They might charge you a stock commission cost when they trade your stock on your behalf. Other planners may teach you how to trade stocks so you don’t have to pay them every time.
Retainer
Monthly membership fees and yearly or quarterly retainers are becoming more typical forms of payment, according to the Kitces poll. Retainers enable advisers to serve customers who may have significant income (enough to cover a full-fledged advising charge) but little to no portfolio assets to manage.
The financial planner cost of a retainer can range significantly from $600 to $40,000. However, the typical retainer price increased by $800 from two years earlier to $4,000 per year in 2020.
Frequently Asked Questions
What is the normal fee for a financial planner?
The standard financial planner fees for a financial planner vary depending on the planner’s fee structure, frequency of service, and the client’s demands.
According to a 2021 study by Advisory HQ, financial advisers typically charge a fixed-rate fee for the continuing portfolio management of between $7,500 and $55,000, or 1.02% of assets under management (AUM).
Is it worth paying for a financial advisor?
Your particular situation and the financial counselor you decide to work with will determine whether or not a financial advisor is worth your money. They will be a wise financial investment if they support your objectives, pay attention to your needs, and behave in your best interests.
For example, working with a financial advisor might be worthwhile if you find it difficult to make financial decisions independently or need help determining where to begin your economic journey. However, you might not need a financial advisor if you’re already on a good financial path and are okay with looking into the finest solutions for your needs.
What is the difference between a financial planner and a financial advisor?
An independent financial planner will take a comprehensive approach to personal financial planning and look at the “big picture” of your finances. You can construct a financial plan with the aid of a financial planner to achieve the goals you have for your life.
A financial advisor typically concentrates on a single issue. They do not consider the big picture. Instead, they take a limited view of your request and only offer advice regarding what you asked for.
So the main distinction between a financial planner and a financial advisor is that the first is more concerned with you and your goals, while the second is more concerned with your finance and investments.
This article answers the question, “How much does financial planning cost?”. In short, it will depend on your demands, planner types, and fee structures. Consider all the factors carefully before deciding on Outsourced Accounting Services, as they will accompany you along your finance journey.
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