A:

Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a typical 1% rate on a $1 million portfolio, financial advisors take home $10,000 per year. However, the more assets a client has, the lower the percentage he pays for advisory services.

Other Payment Options

Advisors can also charge clients per hour or based on commission rather than a certain percentage of assets. It all depends on the type of advisory services a client needs. Self-directed investors tend to run their own portfolios and only seek suggestions from advisors or the option to use complicated asset allocation models. Another set of investors may want advisors to take control of their portfolios and make all the decisions for them. These investors tend to have less of an understanding in financial matters.

Self-directed investors tend to pay advisors flat fees or go with hourly rate payment plans. The usual rates are $250 to $500 per hour, with the total ranging from $3,000 to $5,000 on various projects such as generating an estate plan for a client. Flat fees range from $1,000 to $2,000 for an advisor to look over a client's portfolio and make simple suggestions.

The second set of less financially inclined investors tends to pay financial advisors a percentage of its assets. This is usually the most expensive route. However, it gives advisors an incentive to not take huge risks or ones they would not take with their own money. Since advisors receive a percentage, they have an interest in managing their clients' portfolios very well.

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