Cost of Financial Advisory

Many people believe wealth management is “only for the rich”. Whilst advisory incurs a fee, just like any service, it doesn’t mean it is only accessible to the affluent. Nowadays, fees can be dynamic and creative, allowing for flexibility when offering advisory for individuals at different stages of financial health.

I have met many people, including some friends, who had believed that financial advisory is out of their reach, some claiming that they hadn’t spoken to me because they weren’t “wealthy “enough! Besides a slight offence that my friends thought I wouldn’t help them…I was taken aback that people believe they can’t afford financial help and that advisory is only for the wealthy. This evidences a flaw in our image, so I’m here to show you how it isn’t just for the “elite”!

First things first; there are many ways to manage your wealth, from human advisory, Robadvisory or DIY investing. For this article, I will be focusing on those looking for the human touch as there lies the image that it is expensive/out of reach.

Remember that advisers need to make money; they cannot work for free, but making sure their fees are fair, honest and appropriate will help you find an efficient adviser. 


There are many ways an adviser may charge: 

  • Percentage of Assets
  • Fee-Only
  • Fee-Based
  • Commissions
  • Hourly, Flat & Retainer Fees

Have a read how these are used in a great article here — make sure when you are seeking advice you know exactly how your fees are being paid! It may be that adviser mixes these options; what is important is understanding these costs and making sure you are not being overcharged. I will use some examples to help you understand the fees you may come across when presented with financial advice.  

Percentage of Assets (AUM)

The industry average is 1% per annum, which may be lower or higher depending on how much your portfolio is. So, if your adviser manages $50,000 of your investments, they will earn $500 of that in one year, normally paid in smaller chunks throughout the year. It is quite common to see this figure drop when a client reaches $1 Million of Assets Under Management (AUM) with a client.

AUM is commonly used for the ongoing service that an adviser charges for maintaining the portfolio with a client, which often involves paying for the ability to continually speak to your adviser. This can be flexible; for example, you may be quite involved with your portfolio planning, so only wish to pay 0.5% per annum, whereas it may be more appropriate than 2% per annum is charged for more complex situations. 

Fee-Only & Fee-Based

Fee-Only simply means that the adviser only takes a fee on your assets or for their work. For example, the adviser may only take fees on their AUM fees, such as the 1% per annum fee stated previously, a one-off fee or rates for their service. 

Fee-Based advisers may take “extra”, such as commissions, on top of their fee. Contrary to the belief that this is only for making a “bonus”, this method can also spread costs over a longer timeframe and make a product more accessible to an individual who is just starting out. Ask your adviser how they use commission, if so.


This is where you need to be careful. Often commission charges are taken from products or funds, not from your direct investment, and in some jurisdictions do not need to be disclosed — which is a warning sign! Always ask about commissions, no matter where you are. That does not mean they are bad, it just means they can be misused by advisers. 

With your $50,000 investment, if the adviser is going to put $10,000 into a Technology fund, they may be able to take — for example — 5% of this $10,000 in commission = $500. If they had charged you $1500 for the initial planning, they are then taking $500 from their fund choices, which could be many! In some jurisdictions, fee disclosure is not mandatory, so ask your adviser about the commission on funds. 

For example, the initial fee for a plan may cost you $1500, but you are only starting with $200 a month. The adviser can choose to take a commission from the product so that they can cover their $1500 fee spread over several months, rather than an upfront cost to the client. This way, a client is able to start their investments on the lower end without having to pay a large amount out of pocket.

Hourly, Flat & Retainer Fees

These fees are based on a fee model for the service the adviser provides, whether by the hour, a one-off fee or a set fee paid at intervals. These fees can help advisers be more objective, yet can be costlier to the starting investor.

For example, in jurisdictions where commissions cannot be taken, it is common that advisers charge by the hour for their service. Rates can start from $150, which can be pricey for someone starting out. That said, it is important to remember that this advice may help you save more in the long run than by doing it yourself. 

A flat fee (such as the $1500 fee aforementioned) often covers the initial consultation, planning and implementation of a portfolio, which pays for the adviser’s expertise, time and administration on behalf of the client for this work. 

A retainer fee may be used instead of an AUM, in which case the adviser is paid a flat fee at intervals and the cost depending on the level of service provided. Realistically, this could cost from $2000 and much more a year for the ongoing service, regardless of how much your assets are worth. 

Fees In Action

Now we know how you can be charged, let’s see how this translates to cost-effectiveness. This really boils down to whether or not the options available to you are within your reach, but more often than not people are not seeking any assistance simply because they think they can’t.

For example, just because someone you know paid $150 an hour to sit down with an adviser, doesn’t mean that’s the only option for you. There may be a free initial consultation, or fees could be spread out through their AUM or use of commission-paying products.

The difference here is that if you just want a one-off consultation and manage things yourself, you will need to pay upfront. However, if you wish for ongoing advice, these can spread out costs and make it easier; perhaps you may even consider using a retainer fee until you are happy to go solo. 

It also depends on your initial investment. If you have a lump sum of, say, $10-20,000 to invest, the initial upfront cost could be $1500, followed by an ongoing service fee of 1% per annum; this would start around $100-200 a year in this case. Now, remember my concerns with commission? An adviser may charge no initial upfront fee but claw back this cost from the fund choices; if an adviser continues to do this, this may be more expensive than an initial upfront fee, and not be disclosed to a client. 

A Fee-Only adviser is arguably more transparent and has a fiduciary responsibility to act in the best interest of a client, seeing as they don’t take commissions. However, this leads to them being more expensive up front, as you are paying directly for their service and often even just to sit down with them. Fee-Based can mix this up and spread costs in exchange for ongoing service and likely an upfront fee if a lump sum is invested. Commissions can also spread out costs, but be mindful of how they are being taken.

Realistic Expectations 

Remember, at the end of the day you are paying for a service. How and how much you pay for this service should be researched carefully and considered for your position, not what anyone else is doing. If you believe that financial advisory is out of your reach, you most likely haven’t explored all options. 

Stripping it down, work around the industry AUM average of 1% per annum and shop around for rates in your area when it comes to fixed fees. Financial advisory can be a lot more than investment management nowadays and fees reflect that; advisers are under more pressure to justify their expenses over other options available, and this has led to more thorough services being offered over a Roboadvisory, for example. 

At the end of the day, you are paying for a human adviser and the level of expertise you need from them; the service you require of them will be reflected in those fees. Make sure you do your due diligence and research, but ultimately decide upon someone you can trust. If their fees are transparent, fair and justifiable against other options, there’s no reason you can’t afford advice with the right opportunity.         

Fancy some financial advice? I’m here to help!

If you have any questions or are seeking some advice, drop me an email at:

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