What Do Financial Advisors Do and How Much Do They Cost?
6 Min Read | Last updated: March 15, 2026
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What does a financial advisor do, and how much do they cost? Learn what to expect, how fees work, and what to consider before hiring one.
At-A-Glance
- Financial advisors can help you preserve and grow your assets.
- But their fees can actually cost you tens of thousands of dollars over time.
- You need to understand the costs and benefits going into any financial advisor relationship.
Good financial advice can help you make better financial decisions, reduce your debt, or cushion your retirement. But it can also cost you more than you think. And bad financial advice can be even costlier. That’s why it’s important to choose your financial advisor carefully and understand the tradeoff between what you’re paying and what you’re getting in return. To paint the big picture of financial advisor costs, this article lays out the fees, benefits, and risks.
Understanding the Full Impact of Financial Advisor Costs
If you’re confused about what financial advisors cost, so are many people. In fact, 54% of those who invest don’t know exactly how much they are paying their advisor.1
There’s good cause for confusion and ambivalence about financial advisors’ fees. While some fees are clearly stated, others are buried, and many may seem too insignificant to bother with. But your financial advisor’s costs can actually have a big impact on your finances.
How big? Literally tens of thousands of dollars, over time. In the chart below, the Securities and Exchange Commission (SEC) compared a 1%, 0.50% and 0.25% ongoing fee on a sample investment portfolio. Over 20 years, the higher fee (green line) would reduce the portfolio’s value by nearly $30,000 compared with the lower fee (blue line).2
Portfolio Value from Investing $100,000 Over 20 Years
How could that be? Saving and investing are percentage games. Every fraction of a percent that you gain really counts, as it is reinvested and “compounds” over time, accelerating your investments’ growth by delivering returns on your returns.3 Financial advisory fees have the opposite effect, since they reduce the amount that you are reinvesting and compounding over time.
Financial Advisors and Their Fees Come in Many Varieties
One way to break down the types of financial advisors is to look at licensing, registration, and certifications.
- Registered investment advisors typically earn a percentage of assets under management to advise clients on their portfolios of stocks and bonds.4 Many are Chartered Financial Analysts, a certification that requires passing rigorous exams.5 The SEC, where most advisors are registered – although some have state licenses – provides a lot of background information about specific investment advisors and their firms.6
- Certified financial planners help clients with planning retirement, managing taxes, choosing insurance, setting up their estates, and meeting other financial objectives. The Certified Financial Planner Board of Standards’ website is a hub of information about them.7
- Brokers typically make commissions to execute trades and other transactions.8 FINRA regulates brokers, and its BrokerCheck Online tool provides detailed information about them.
- Robo-advisors are digital platforms that collect financial information from clients and automatically invest their assets, sometimes for subscription fees of $3, $5 or $10.9 Robo-advisors registered with the SEC can be found on BrokerCheck as well.
All that said, it’s not uncommon to see hybrids of all four of the above, going by names including money managers, wealth managers, private bankers, and others. There are also big, medium, and small advisory firms, including giant low-cost mutual fund companies and online fintechs as well as local boutique outfits.
The Benefits and Risks of Hiring a Financial Advisor
Of course, people can save and invest without financial advisors, who neither guarantee that they will outperform the market nor that you will achieve your financial goals. Still, a financial planner can be worth far more than their costs, helping you look at the big picture and guiding you through budgeting, tax issues, retirement planning – and through major life events like paying for college, getting married, and starting a family.10
Bad financial advice is a different story. For instance, fees and commissions can pose potential conflicts of interest between an advisor and a client. Conflicts of interest can result in financial advisors making recommendations for services an investor doesn’t want or need, or it could result in higher fees.11 In addition to the federal government’s regulation of fiduciary standards, which require financial advisors to put their clients’ interests ahead of their own, some professional and advocacy groups are stepping in with their own codes.12
Ultimately, one of the best ways to measure your financial advisor’s worth is to track your portfolio’s return on investment and compare it to the overall market’s growth. After all, if you’re paying someone a fee to provide financial advice, they should be able to get you a better return than the market average, which you can obtain at lower cost via a passive index fund.13 Online statements usually include portfolio returns minus fees, along with the capability to see how much your investments have grown over the past month, quarter, year, or other time period of your choice.
Questions to Ask a Financial Advisor
To cut through the confusion, here are questions to ask when hiring a financial advisor, from the U.S. Department of Labor:14
- What are your credentials?
- Are you a fiduciary, meaning you have a formal commitment to put clients’ interests ahead of your own?
- How do you get paid – by the amount of assets you manage, by commission, or by another method?
- What are the total fees to purchase, maintain, and sell the investments you recommend?
- What are the ongoing fees to maintain my account?
The Takeaway
Financial advisor costs can be difficult to fathom, but understanding them is key to achieving your financial planning and investment goals. As the SEC says, “over time, [even small ongoing fees] can have a major impact on your investment portfolio.”2
1 “Advisors Face Evolving Expectations Around Fee Structures,” Morningstar
2 “Understanding Fees,” U.S. Securities and Exchange Commission
3 “What is compound interest?,” U.S. Securities and Exchange Commission
4 “Investment Adviser Industry Snapshot 2025,” Investment Adviser Association
5 “CFA® Program | Become a Chartered Financial Analyst®,” CFA Institute
6 “Glossary,” U.S. Securities and Exchange Commission
7 “Financial Planners,” Financial Industry Regulatory Authority
8 “How to Become a Stockbroker,” CFA Institute
9 “Robo-Adviser,” U.S. Securities and Exchange Commission
10 “The Value of Financial Planning | CFP - Let's Make a Plan,” CFP Board
11 “Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Conflicts of Interest,” U.S. Securities and Exchange Commission
12 “Code of Ethics and Standards of Conduct,” CFP Board
13 “Trends in the Expenses and Fees of Funds, 2024,” Investment Company Institute
14 “Questions to Ask an Investment Advice Provider,” U.S. Department of Labor
Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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