If you prefer to have your investments professionally managed, fees can range from a small percentage of your portfolio to several thousand dollars per year. You have a choice!

In my years working in CPA firms, many of our clients had investment portfolios ranging in size from $250,000 to several million dollars. As you might expect, they made frequent use of financial advisors. Many were business owners who had little time or inclination to manage their own investments.

Each of those clients paid annual fees ranging from 1% to 2% or more of their portfolio values. Most were only too happy to pay the fee, not only to spare themselves the job of managing their own investments, but also for the benefit of having a financial advisor to provide guidance and even to chat with on a regular basis.

But that was before robo-advisors began springing up after 2010, offering their lower annual advisory fees. As a result, you now have many more options for getting professional investment management, and at a wide range of fees, depending on the service level you prefer.

But is the lower fee charged by robo-advisors worth giving up the many benefits that come with traditional, human financial advisors? And are there other investment management options that sit somewhere between the two? 

The answer won’t be the same for everyone, and that’s what I’m going to explore in this article.

Different financial advisors come with different fee structures

How Much Do Financial Advisors Cost? - Different financial advisors - different fee structures

If you’ve done any investigation of investment management services, you’re probably already aware of the many different options available. Two of the big ones are:

  • Traditional human financial advisors who provide comprehensive financial advice, in addition to investment management. Since it’s a hands-on approach, the fees are substantially higher than what you’ll pay for an automated investment service. 
  • Automated investment services are typically what’s known as robo-advisors. From an investment standpoint, the service they perform is very similar to traditional financial advisors. But the process is automated, and you’ll usually be assigned a predetermined portfolio allocation based on your risk tolerance. Customer contact is limited to reduce costs.

The major advantage of robo-advisors is that the fee structure is only a fraction of that charged by traditional financial advisors. 

But is low-cost the only factor you should consider when evaluating investment management?

Let’s consider the service levels, costs, and any trade-offs you might make using either type of service. 

Traditional human financial advisors – what they do and how much they cost

How Much Do Financial Advisors Cost? - Traditional human financial advisors – what they do and how much they cost

These are typically affiliated with large investment firms, like Raymond James and Edward Jones. They have a variety of fee structures and offer a “hands-on” approach to investment management. 

The critical advantage of traditional financial advisors is the personal touch they provide. You’ll usually work with a primary financial advisor, though that person may be assisted by other members of his or her staff. However, ultimately it’s the financial advisor who acts as “quarterback” in your relationship.

For example, they’ll:

  • Custom design your investment portfolio.
  • Provide detailed reports upfront and on a regular basis.
  • Be available for direct contact by phone or email if you have any questions or concerns. If the financial advisor is located in your community, you’ll also have the benefit of face-to-face meetings.

But perhaps the biggest advantage offered by traditional financial advisors is that they offer advice that goes beyond investment portfolio management.

A financial advisor will take the time to get to know not only your financial situation, but also the details of your career, your family, your future goals, and any financial concerns you have.

In learning about your personal situation, the financial advisor is able to direct you toward creating one or more financial plans to enable you to reach your goals. That can be retirement, saving for your children’s education, or paying off the mortgage on your home early. 

Traditional financial advisor fee structures

Because of the custom nature of services provided by traditional financial advisors, they offer different fee structures. I’ll talk about a couple of the big ones, but first, here’s a table comparing the three biggest traditional financial advisors:

Advisor Advisory feeMinimum initial investment Special features
VanguardFor Vanguard Personal Advisor Services® the fee is 0.30% of assets under management$50,000Account dashboard so you can see and update your financial plans
FidelityFor Wealth Management the fee is 0.50%–1.50% $250,000Fidelity Rewards+, such as identity protection
Charles SchwabSchwab Private Client™ users will pay 0.80%$500,000Hybrid investing option

Percentage fees

These are generally 1% or higher. They often work on a tiered basis. For example, the fee may be 1% on a portfolio of $500,000 or more, but 1.5% on a portfolio of $250,000.

When percentage fees are used, financial advisors usually have a minimum portfolio size requirement. This is usually at least $250,000, but may be $500,000 or more at certain firms. 

Flat fees

These can come in several forms. Some advisors charge an hourly fee, which can be anywhere between $200 and $500. This type of arrangement can be cost-effective on a very large portfolio since it may result in a lower overall fee on an annual basis than a percentage arrangement. 

Other advisors charge a flat fee to manage your investments each year. The fee will be several thousand dollars and based largely on the type of investing you want (for example, passive management or active management), or even the number of asset classes and securities you want managed.

And since financial advisors often provide services beyond investment management, such as financial planning or estate planning, you may pay an additional fee on a per plan basis. For example, the advisor may have a flat fee or a percentage fee to manage your regular investment portfolio. He or she may charge a separate fee to develop specific financial plans.

The amount of the plan fee can vary based on the complexity of the plan the advisor needs to develop, as well as the dollar amount of the assets involved. And there will be additional fees if the financial advisor needs to bring in outside professionals, like attorneys, CPAs, or actuaries. 

Always make sure to go with fiduciary financial advisors 

One of the most important factors in choosing a financial advisor is their status as a fiduciary. This is a legal status under which a financial advisor is required by law to put the investor’s interests first. In practical terms, this prevents the advisor from managing your portfolio in a way that will financially enhance the advisor – at your expense.

If you shop for a traditional financial advisor, you’ll quickly learn there are dozens – and maybe hundreds – in your area. It can be incredibly confusing, not the least of which because the definition of a financial advisor isn’t exactly set in stone.

For example, many insurance agents bill themselves as financial advisors. But what they really are is insurance salespeople, who will “invest” your money in annuities and cash value type life insurance policies. 

You’ll need to be able to specifically find fiduciaries to work with. Two services – Paladin Registry and SmartAsset – can help you do that. 

Paladin Registry offers a matching service to help you find a reputable financial advisor in your area. This service won’t cost you a thing, making it the perfect place to start your search. Plus, they provide guides that help you understand how to interview a financial advisor and what to really look for in an advisor.

SmartAsset is a free financial advisor matching service; Gen Z and Millennials will find their service easy to use because it starts with a quiz so you can help clarify your financial goals. In just a few minutes, SmartAsset gives you three options for pre-screened advisors. At this point, you set up an interview with each of them to make sure to pick the advisor who is going to best work well with you.

Robo-advisors – what they do and how much they cost

How Much Do Financial Advisors Cost? - Robo-advisors – what they do and how much they cost

Robo-advisors came along only in the past decade, and have proven to be disruptors in the investment management arena.

Their primary advantage is low advisory fees. Charging just a fraction of what traditional financial advisors do, they offer an opportunity for investors to keep more of their investment returns.

Robo-advisors are able to charge super low fees because the whole investment process is automated. It takes place entirely online, limiting the amount of personal interaction. That process enables robo-advisors to maintain much smaller staffs, which is a large part of the reason why they charge much lower fees.

The process will be very similar to that used by financial advisors. When you open an account, you’ll typically complete a questionnaire that will determine your risk tolerance, time horizon, and investment goals. From that information, your portfolio will be constructed. 

Both the initial portfolio and the ongoing management will be handled by computer algorithms. Your portfolio will be periodically rebalanced to maintain target allocations, and dividends will be reinvested. Many robo-advisors now provide tax-loss harvesting to minimize capital gains generated by your portfolio.

Robo-advisor fee structures

Robo-advisors work on a percentage of AUM fee structure. The robo-advisor field has become extremely competitive, forcing services to set their fees in a tight range. Some even charge no advisory fee at all. 

Because of their low fees and low minimum initial investment requirements, robo-advisors are well suited to new and smaller investors. They offer an opportunity for such investors to get the benefit of professional investment management, without the need to have a large portfolio.

The table below displays the basic features and fees of some of the most popular robo-advisors:

Robo-advisorAdvisory feeMinimum initial investmentSpecial features
Betterment0.25% Digital Plan; 0.40% Premium PlanNoneUp to one year managed free
Wealthfront0.25%$500First $5,000 managed free
M1None$100Create your own portfolios, including individual stocks

Hybrid investment advisories are another option to consider

How Much Do Financial Advisors Cost? - Hybrid investment advisories are another option to consider

A small number of firms have sprung up that combines some of the best qualities of both traditional financial advisors and robo-advisors.

Personal Capital may be the best example. They charge fees that are lower than traditional financial advisors, but provide more comprehensive financial advice and management than robo-advisors.

Similar to robo-advisors, Personal Capital has a lower annual advisory fee than traditional financial advisors. At 0.89% for most portfolios, it’s well below the 1% to 2% or more charged by traditional financial advisors, but considerably higher than the 0.25% to 0.50% charged by many robo-advisors. 

But much like traditional financial advisors, Personal Capital offers investment management with a personal touch. A portfolio is created to match your investor profile, using a Monte Carlo projection engine as well as the expertise of financial professionals. In other words, they don’t rely completely on algorithms to manage your portfolio.

They also provide live financial planning services that can help you with retirement planning, estate plans, and saving for other life’s goals. 

Because of the higher level of service provided, Personal Capital does require a larger minimum portfolio size than robo-advisors, at $100,000. But that’s well below the minimum portfolio typically required by traditional financial advisors.


If you’re looking for a financial advisor, you have plenty of choices, particularly as to how much you will pay for the service.

If you have a larger portfolio – at least $250,000 – and want more personal service, including regular help in managing your overall financial situation, you should favor traditional financial advisors. They charge higher fees, sometimes more than 1% of your portfolio, but you’ll build a relationship with a personal advisor who will be there to discuss your investments as well as your long-term goals, like retirement or financial planning.

And if you’re going to choose a traditional financial advisor, make sure that person is a fiduciary. You can find a large selection of fiduciaries by taking advantage of the Paladin Registry service discussed earlier in this guide. 

If you’re a new or small investor and are simply looking for basic investment management at a low fee (or even no fee), robo-advisors will be the best choice. With their very low or nonexistent advisory fees, you’ll get the maximum benefit of your investment returns. However, don’t expect personal service, especially from a dedicated financial professional. The low fee structure of robo-advisors just doesn’t allow for it.

Finally, if you want a mix of both – personal financial advisory services at a relatively low cost – you can choose a hybrid service, like Personal Capital. 

What’s most important is to begin investing. And if a lack of investing knowledge is holding you back, take advantage of one of the above services. You owe it to yourself and your future.

Read more:

Recommended Investing Partners

  • Recommended M1 Finance gives you the benefits of a robo-advisor with the control of a traditional brokerage. M1 charges no commissions or management fees, and their minimum starting balance is just $100. Visit Site
  • No Minimum Low-fee robo-advisor with no minimum investment. Creates fully-automated portfolios based upon your desired allocation. Visit Site
  • $500 Minimum Wealthfront requires a $500 minimum investment and charges a very competitive fee of 0.25% per year on portfolios over $10,000. Visit Site

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About the author

Total Articles: 153
Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed “slash worker” – accountant/blogger/freelance web content writer – on Out of Your Rut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides “Alt-retirement strategies” for the vast majority who won’t retire to the beach as millionaires. He also frequently discusses the big-picture trends that are putting the squeeze on the bottom 90%, offering work-arounds and expense cutting tips to help readers carve out more money to save in their budgets – a.k.a., breaking the “savings barrier” and transitioning from debtor to saver. He’s a regular contributor/staff writer for as many as a dozen financial blogs and websites, including Money Under 30, Investor Junkie and The Dough Roller.