“Google, how much does it cost to see a financial advisor?”

If you’re searching this, you’ve likely done your research and understand anyone can call themselves an advisor, but there are qualifications you should be looking for if you’re in a place where you have generated wealth. The next obvious question is, “How much will it cost me?”

You can pay a financial planner for their services in three ways: commission, percentage of assets or an hourly fee. Each has its pros and cons.

Commission Based

For a commission arrangement, the provider pays the advising firm an amount when they use their products. For example, insurance advisors typically still work off commission. They only get paid when you buy something from them. I do not like this arrangement because it relies on the advisor’s integrity to make sound recommendations. Many have achieved this balance, but a quick Google search will reveal the other side of that story. It does have its place, though.

Fee-Based

Fee-based advisors charge a percentage of the assets they manage. Often, the fee reduces the more assets they manage. This percentage may start at 1.5% with fewer assets, with them dropping to around 1% on a million dollars and much less on more. This model has nothing to do with what products you choose to meet your goals, so your advisor isn’t incentivized to sell you specific investments. This is a good start. This isn’t conflict-free; on the positive side, they are incentivized to grow your investments, so that aligns well. On the downside, the more you have with them, the better for the firm.

Fee For Service Based

You pay hourly, or the subscription model is becoming popular. You directly compensate them for their time. The downside to this is it can be expensive upfront. I have clients under all three models and charge $200 an hour. The upside is there is no incentive to do anything other than offer your expertise. The downside to hourly is the barrier to advice. The unknown of what it will cost. That’s the issue with lawyers; you jump on the phone and wonder if you’ll get a bill in the mail. This creates a divide between those who can afford help and those who can’t. That advice gap over time further perpetuates that divide.