How Much Does It Cost to Work with a Financial Adviser in Dallas, TX?

Financial advisers serve as navigators to steer you through the complex maze of saving, investing and planning. But in Dallas, TX, as with anywhere, the costs and fees associated with their services can often be confusing. So, you may be asking: How much does it truly cost to hire a financial adviser in Dallas, TX?

Don’t worry, you’re not the only one. Many people are uncertain about the exact fees associated with financial advice. According to a study by the FINRA Investor Education Foundation, among those who consult a financial professional, 60% believe they aren’t being charged.

The confusion often arises because financial advisers have various charging methods.

Generally, financial advisers use three main cost structures:

1. A percentage of assets under management.
2. An hourly, annual or flat fee.
3. Commissions from recommended investment products.

Advisers who charge a percentage of assets under management (1) or a flat fee (2) are known as fee-only advisers. While those who earn commissions (3) are commission-based advisers. There are also fee-based advisers who may charge both a fee and commissions.

You’ll find financial advisers in Dallas charging all different types and at different rates. So, to help you better understand the cost of working with one, let’s go through these three cost structures.

Cost of fee-only AUM Financial Advisers in Dallas, TX

A vast majority of financial advisers adopt the assets under management (AUM) fee structure.

Under this payment model, an adviser will withdraw a certain percentage of your account as an advisory fee. The fee is typically deducted quarterly, monthly or annually.

A standard advisory fee is around 1%.

Here’s how it works:

If you invested a $1 million portfolio with a financial adviser who charges 1% AUM, you’d pay a $2,500 quarterly advisory fee (1,000,000 x 0.01/4 = 2,500).

However, many fee-only advisers use a tiered pricing model, with the fees decreasing as your AUM increases:

• A $1 million portfolio might be charged at 1%;
• A $3 million portfolio is then charged at 0.75%;
• And a portfolio worth $10 million might have a 0.5% fee.

Bottom line: with a Dallas fee-only financial adviser, the cost will vary based on the fee percentage and fee structure. And, since the fee is based on the size of your account, which will change based on investment performance, the amount you pay could change from statement to statement.

Why consider a fee-only AUM adviser in Dallas, TX?

Benefits

Many financial advisers prefer AUM pricing because it aligns their goals with the client. The better the client does, the better the adviser does.

Most importantly, fee-only financial advisers operate under a fiduciary mandate, ensuring they are legally obligated to prioritize clients’ interests.

What do you get for this fee?

Under the AUM model, you typically receive access to all the services a financial adviser offers, including financial planning, retirement planning, investment management and more. So, the adviser would help you implement your financial plan while also managing your investment portfolio.

For instance, Advance Capital Management is a fee-only financial adviser located in Dallas, and you can view our menu of financial planning services here.

A fee-only AUM financial adviser is ideal for Dallas residents seeking consistent, hands-on support.

Potential drawbacks

However, those looking for minimal advice and prefer a DIY investment approach might find other financial advisers more appealing.

What people may not like about the AUM model is the thought of paying fees even when their account declines or when they don’t need a lot of help. But this is balanced by the fact your investments generally need constant attention (buying and selling funds, portfolio rebalancing, making tax-efficient withdrawals, etc.).

Cost of flat-fee financial advisers in Dallas, TX

For financial advisers that operate under a fixed-fee model, the charges are pre-set and are typically on an hourly, quarterly or yearly basis.

Fixed fees and hourly fees typically apply to financial planning or consulting services, as well as special projects. According to a 2021 study by Advisory HQ, fixed fees typically range from $7,500 (for investments under $499,999) to $55,000 (for investments over $7.5 million). Hourly fees can be anywhere from $120 to $300 an hour, depending on the advisor and the complexity of the project.

Some Dallas-based advisers may offer specific services at a fixed price. For instance, a comprehensive financial plan might cost you $1,000.

The overall cost largely rests upon the extent of assistance you need.

Who should consider a flat-fee adviser in Dallas, TX?

Benefits

The appeal of a flat-fee adviser lies in its pay-as-you-use format. Investors who need intermittent financial advice but are confident in executing plans independently might gravitate toward this model. Typically, this category includes those without intricate financial requirements – possibly younger Dallas residents starting their investment journeys.

Potential drawbacks

However, this model might not resonate with those looking for an all-encompassing financial strategy. Notably, numerous flat-fee advisers aren’t authorized to handle investment transactions. Consequently, both the application of the plan and investment governance would rest on your shoulders.

Cost of commission-based financial advisers in Dallas, TX

Commission-based advisers earn through the sale of investments in the form of commissions and associated fees. Mostly, the investment or fund company compensates these advisers based on the amount you invest. Many commission-based advisers are broker-dealers.

Pinning down the exact costs with commission-based advisers in Dallas is a tad challenging. The reason is that commissions aren’t always transparent. While the investment entity is technically paying the commission, it's indirectly drawn from your invested amount.

Therefore, you should recognize the potential conflicts of interest in the commission-based model. Given their earnings are linked to product sales, unbiased financial counsel might sometimes take a back seat.

Some advisers, known as “fee-based advisers,” use both models. They earn from service fees and product commissions, making their compensation a blend of the two. Their operation treads a nuanced line.

It’s crucial to differentiate between ‘fee-only’ and ‘fee-based’ advisers. The former strictly shuns commissions, while the latter can times act as a fiduciary but at other times prioritize product sales.

Who in Dallas might prefer a commission-based adviser?

Investors who are steering their investment tactics might find a trustworthy commission-based adviser helpful.

However, for a comprehensive financial plan, most people should consider working with a fee-only adviser.

How to determine the costs of a financial adviser in Dallas, TX

While it would be convenient if financial advisers in Dallas displayed their fees as visibly as gas stations do for gasoline prices, that isn't the case. Thus, the onus is on you to investigate and understand the costs. Fortunately, there are straightforward methods to gauge what a Dallas-based financial adviser might charge.

Kickstart your quest by posing these crucial questions to your prospective adviser:

• How do you derive your compensation?
• Can you break down the overall charges and fees for utilizing your services?
• Are there any commissions or hidden fees that won't reflect on my statements?
• Will you consistently maintain a fiduciary role?

If an adviser hesitates or dodges these queries, consider it a red flag and think about looking elsewhere.

Additionally, the Securities and Exchange Commission mandates that anyone offering financial services or products disclose their compensation through the Form ADV. This paperwork unveils crucial details about an adviser's modus operandi, encompassing fee structures, account prerequisites, and any disciplinary actions they might have faced. You can usually find this form on an adviser's online portal.

The bottom line

In summary, financial advisers work under a variety of compensation models. If you’re weighing your options, understanding these models can prove instrumental in making a well-informed choice for your financial future.

At Advance Capital Management, we pride ourselves on being a fee-only, fiduciary adviser. If you wish to navigate the possibilities of partnering with a fee-only adviser tailored to your financial needs in Dallas, schedule a call here with one our of advisers today, and let’s start a conversation.