For some, working with a financial advisor may connote having pockets deep enough to meet with an expert in a mahogany-paneled office. But you don’t always need to be wealthy to benefit from financial advising. There are many types of advisors, and most investors will be able to find one who works for their specific situation.
A financial advisor can help you best determine if you are on track to meet your long-term financial goals. This expert can work to help you save more, reduce your debt and invest more wisely. But how much do you really need in order to invest with an advisor? We’ll unpack that below.
How Much Money Should You Have Before Hiring a Financial Advisor?
Investment managers, financial consultants, financial planners and even digital investment management services called robo-advisors are all considered financial advisors. As a result, minimum thresholds vary widely.
The amount of money that you’ll need to get approved as well as how much you should have before it really pays off might have the same answer. The right amount of money you’ll need will depend on what you’re looking for a financial advisor to do as well as how much you’ll have to pay in fees. Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor.
Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more. In general, if an advisor requires a minimum of $100,000 to open an account, you can assume that the financial advisor also offers wealth management services, tax and estate planning.
However, wealth managers are not the only financial advisors. People with less than $100,000 in assets can also benefit from hiring a certified advisor. If you have no or very little (we’re talking less than $25,000) in cash, you could speak to a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) who could help you formulate a starter plan to build up your assets.
Robo-advisors are also enjoying a surge in popularity, and they too are considered financial advisors. Many large investment firms, such as Fidelity, Vanguard, Merrill and Charles Schwab, offer robo-advisory services. Robo-advisors often charge no advisory fees, no commissions and, best of all, you can open an account with as little as $10. These accounts build diversified portfolios and invest your money in low-cost exchange-traded funds (ETFs).
When Should You Speak with a Financial Advisor?
The best time to speak with a financial advisor is simple: as soon as possible.
Financial planners may charge a fee to evaluate your financial position and recommend a plan that helps you towards your goals. Low-minimum robo-investment services make it accessible for lower-asset individuals to start building wealth early on, and if you do have a substantial amount of assets, speaking with a qualified advisor can help you decide where and how to manage your money over time.
How Much Do Financial Advisors Cost?
There are two types of financial advisors: fee-only and commission-based. Fee-only financial advisors are preferable, as you can be assured that they are not recommending investments to you in order to pad their bottom line. Commission-based advisors, on the other hand, are paid based on the product referrals and sales they make.
Fee-only financial advisors may charge an hourly, monthly or flat fee to recommend investments, adjust your asset-allocation and manage your portfolio. In the case of robo-advisors, there is often no advisory fee, but you could pay fees to buy and sell their recommended ETFs–which may be affiliated with the robo-advisor managing your account.
For a human advisor, expect to pay a fee. This may be a straightforward $200-per-hour fee, or it may be 1% of managed assets. Oftentimes, financial advisors require minimum investment thresholds so that 1% fee can cover their costs to manage your money. After all, 1% of a $100,000 minimum means they only earn $1,000 in a year from your account. In most cases though, financial advisors offer a menu of services so that potential clients can select the level of attention and help needed.
The Bottom Line
Financial advisors can help individuals across the board, so don’t wait to speak with one. They can help you reduce debt, save more and invest in ways that might not be possible without their help. You should look for fee-only advisors, as these financial advisors will best represent your interests over the long term.
Tips for Building Wealth
- Not sure what investments and strategies will help you meet your long-term goals? For a solid financial plan, consider speaking with a qualified financial advisor. Finding a financial advisor doesn’t have to be hard.SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s free investment calculator to get a good estimate of how to grow your money over time.
Next Steps
Do you want to learn more about financial advisors? Check out these articles:
- What Is a Financial Advisor Disclosure?
- Can a Financial Advisor Steal Your Money?
- How much do Financial Advisors Charge?
- What Commissions Do Financial Advisors Earn?
- Are Financial Advisors worth it?
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FAQs
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
How much money do you need for a financial advisor to be worth it? ›
Advisors that charge a percentage usually want to work with clients with a minimum portfolio of about $100,000. This makes it worth their time and will allow them to make about $1,000 to $2,000 a year.
What is the minimum assets for wealth management? ›
Any minimums in terms of investable assets, net worth or other metrics will be set by individual wealth managers and their firms. That said, a minimum of $2 million to $5 million in assets is the range where it makes sense to consider the services of a wealth management firm.
What is a good ROI for a financial advisor? ›
Financial advisors can help clarify this by considering individuals' risk tolerance, age, income and other factors. However, here are some general guidelines: General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation.
What is the 80 20 rule for financial advisors? ›
The Pareto Principle emphasizes that 20% of your efforts generate 80% of your results. Therefore, identify the 20% of your expenses or investments that bring 80% of your wealth growth, and cut down on non-essential expenses to maximize savings.
Is 1% too high for a financial advisor? ›
Many financial advisers charge based on how much money they manage on your behalf, and 1% of your total assets under management is a pretty standard fee. But psst: If you have over $1 million, a flat fee might make a lot more financial sense for you, pros say.
How many millionaires use a financial advisor? ›
The study reveals that 70% of millionaires work with a financial advisor, compared to just 37% of the general population. Moreover, over half (53%) of wealthy individuals consider their financial advisors their most trusted source of financial advice.
Should I get a financial advisor if I'm poor? ›
It's smart to use a financial adviser when you need or want professional financial advice. If you happen to have a high net worth and you're comfortable managing it yourself, there may be no need. Even if you don't have a high net worth, if you have a complex situation to deal with, you may want to consult someone.
Should I use a financial advisor or do it myself? ›
Those who use financial advisors typically get higher returns and more integrated planning, including tax management, retirement planning and estate planning. Self-investors, on the other hand, save on advisor fees and get the self-satisfaction of learning about investing and making their own decisions.
Why do financial advisors have minimums? ›
Why Do These Requirements Exist? Economies of Scale: Higher minimum investments allow advisors to work with fewer clients, providing more focused attention and potentially better service. Target Clientele: Advisors often target specific demographics.
Cost: The median AUM fee among human advisors is about 1% of assets managed per year, often starting higher for small accounts and dropping as your balance goes up. What you get for that fee: Investment management, and in some cases, a comprehensive financial plan and guidance for how to achieve that plan.
What is the minimum investment for Fidelity wealth management? ›
Fidelity® Wealth Services (FWS) offers three service levels: Fidelity Advisory Services Team, Fidelity Wealth Management, and Fidelity Private Wealth Management. Each level has its own fees, features, and eligibility requirements. Minimum investment to enroll is $50,000.
Is it worth paying a financial advisor 2%? ›
Without knowing the full scope of services delivered by the advisor, 2% may be too expensive for a portfolio of your size and for a relationship in which tax advice is not provided. This immediate, high-level evaluation is based on benchmarks for typical advisory fees, which we'll dive into shortly.
Is 2% fee high for a financial advisor? ›
Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.
Is it worth hiring a wealth manager? ›
You might not need a wealth manager if you have clear goals and are confident you can create and implement strategies to protect and grow your wealth. However, a wealth manager may be a good idea if you have substantial assets, would benefit from an expert, and have questions you need help answering.
Is it smart to invest with a financial advisor? ›
A good financial advisor or robo-advisor can be worth the cost if you're able to save more money, cut your expenses or better plan for the future. A financial advisor can also help you feel more secure in your financial situation, which can be priceless.
Is 2% high for a financial advisor? ›
Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.
How many clients do you need as a financial advisor? ›
A good average number of clients per financial advisor to have is usually in the range of 50 to 150. But you may need fewer than that if you're primarily targeting high-net-worth individuals. Finding your ideal number of clients can depend largely on your goals as an advisor.
Do financial advisors invest your money for you? ›
Together you and a financial advisor refine your short- and long-term goals, and then your advisor helps you stay on track to achieve those goals. With some advisors, you can do your own investing. Others offer full-service investment management services, handling tasks like trades and portfolio rebalancing for you.
