How Much Does It Cost to Work with a Financial Advisor in Detroit, MI?

Whether it’s planning for retirement, investing in the stock market, or buying a new home, our finances can be overwhelming. This is where the expertise of a financial advisor becomes invaluable. But in Detroit, as with anywhere, the costs and fees associated with their services can often be confusing.

So, you may be asking: “How much does it cost to work with a financial advisor in Detroit?”

Advance Capital Management has been serving the financial needs of Detroiters since 1986. Our goal has always been to provide full-service guidance at a fair cost, so you can keep more money working for your financial goals. Learn more about our Detroit financial planning team here.

The answer is not straightforward, as the cost varies based on several factors, including the type of advisor, the services provided and the complexity of your financial situation. In this article, we’ll dig into these factors, providing a clear picture of what you can expect to pay for professional financial advice in Detroit.

Types of financial advisors in Detroit

When seeking metro Detroit financial planning services, you’ll encounter several types of financial advisors, each with their own approach. Understanding these differences is crucial in finding an advisor that aligns with your financial goals and budget.

Fee-Only Advisors

Fee-only advisors are known for their transparent billing structure. They charge their clients directly for their services and do not receive commissions from selling financial products. This model minimizes conflicts of interest, as their advice is not influenced by the potential of earning a commission.

Typical Services: Comprehensive financial planning, investment advice, retirement planning, and more.

Potentially Good For: Individuals who prefer a straightforward fee structure and want comprehensive advice that is in their best interest, free from sales-driven motives.

Commission-Based Advisors

These advisors earn their income through commissions from financial products they sell, such as mutual funds, insurance policies and annuities. While they can provide valuable services, it’s important to be aware of the potential for a conflict of interest, as their income is tied to the products they recommend.

Typical Services: Product-specific advice, insurance planning, investment brokerage services.

Potentially Good For: Clients who are looking for specific financial products or have a clear understanding of their financial needs and are comfortable with the commission-based model.

Fee-Based Advisors

Fee-based advisors represent a hybrid model, combining aspects of both fee-only and commission-based structures. They charge a fee for their services and may also receive commissions from selling financial products. This dual structure offers flexibility but also requires clients to understand how their advisor is compensated.

Typical Services: A mix of comprehensive financial planning and product-specific advice.

Potentially Good For: Those who need a combination of direct financial planning services and are also interested in purchasing specific financial products.

If you’re comparing Detroit financial advisors, the choice between fee-only, commission-based and fee-based advisors depends on your financial needs, preferences, and the level of complexity in your financial situation. It’s important to ask potential advisors about their fee structure, the services they offer, and how they handle any potential conflicts of interest.

Fee structures of Detroit financial advisors

Understanding the various fee structures employed by financial advisors in Detroit is key to making an informed decision that aligns with your financial circumstances. Here are the most common fee structures you will encounter.

Hourly Rates

Similar to how a lawyer might charge, some financial advisors bill based on the time they spend working on your financial matters. This structure is transparent and straightforward.

Typical Costs: The hourly rate for financial advisors in Detroit can vary. Average hourly investment advisor fees in the U.S. typically range between $120-$300 an hour, according to Advisory HQ.

Potentially Good For: Individuals who need occasional advice or specific financial tasks addressed, rather than ongoing management.

Flat Fees

Advisors may charge a flat fee for a specific service, such as creating a financial plan. This fee is agreed upon before the service is rendered and is not based on the amount of assets you have.

Typical Costs: Flat fees can range significantly depending on the complexity of the service, from a few hundred dollars for basic plans to several thousand for more comprehensive planning.

Potentially Good For: Those looking for a one-time, comprehensive financial plan or specific advisory services.

Asset Under Management (AUM) Fees

This is a common fee structure for advisors who manage investment portfolios. The fee is a percentage of the total assets they manage for you.

Typical Rates: In Detroit and elsewhere, AUM fees can also vary. Nationally, the average AUM fee for a $1 million portfolio is around 1% per year (Advisory HQ). The rate may decrease as the asset size increases, known as a tiered fee structure.

Potentially Good For: Individuals with significant investment assets who prefer ongoing portfolio management and financial advice.

Commissions

Some advisors earn commissions by selling financial products like mutual funds or insurance policies. The commission is a percentage of the investment amount or a fixed fee per transaction.

Consideration: While this structure can be suitable for certain clients, it’s important to be aware of the potential for conflict of interest, as the advisor’s income is directly linked to the products they sell.

Potentially Good For: Clients who are looking to purchase specific financial products and are comfortable with the advisor earning a commission from these sales.

Each fee structure has its own set of advantages and considerations. When choosing a financial advisor in Detroit, it’s crucial to understand how they are compensated, as it can affect the type of advice and service you receive.

Additional costs when working with a financial advisor in Detroit

In addition to the primary fee structures, there are often additional costs that can impact the overall expense of working with a financial advisor. Being aware of these costs is crucial for a comprehensive understanding of your financial commitment.

Transaction Fees

These are fees charged for certain transactions, such as buying or selling stocks, bonds or mutual funds. They are typically charged by the brokerage or custodian managing your investments.

Impact: These fees can vary based on the transaction type and the platform used.

Expense Ratios of Mutual Funds or ETFs

If your advisor invests in mutual funds or ETFs on your behalf, these funds come with their own set of internal fees, known as expense ratios.

Impact: These fees are paid to the fund provider (not the advisor) and not paid directly out of pocket, but they are deducted from the returns of the fund, impacting the overall performance of your investment.

Account Maintenance Fees

The financial institution, or custodian, that holds your investment account may charge an annual or monthly maintenance fee.

Impact: These fees are paid to the custodian and vary by institution. They can sometimes be waived based on the type of account or the balance maintained.

It’s important to ask potential advisors about these additional costs during your initial consultation. Understanding all possible fees will give you a more accurate picture of the total cost of their services and help you budget accordingly.

Steps for choosing a financial advisor in Detroit

Selecting the right financial advisor in Detroit is a decision that can significantly impact your financial well-being. Here are some key considerations to help you make an informed choice:

Assess Your Financial Needs

Begin by understanding your own financial goals and needs. Are you looking for help with retirement planning, investment management, tax strategies or a comprehensive financial plan?

Knowing what you need will help you narrow down the type of advisor best suited to your situation.

Research Advisors in Detroit

Look for advisors with strong credentials and a good reputation. Check their certifications, educational background and professional experience.

Utilize resources like the CERTIFIED FINANCIAL PLANNER™ or Financial Planning Association (FPA) for finding qualified professionals.

Understand Their Fee Structure

Clearly understand how advisors are compensated. Are they fee-only, commission-based or fee-based? Knowing this will help you assess potential conflicts of interest and how their advice might be influenced.

Check for Compatibility

Your financial advisor should not only be knowledgeable but also a good fit for your personality and communication style. Consider setting up initial consultations to gauge compatibility.

Also, ensure that their investment philosophy aligns with your risk tolerance and financial goals.

Additionally, don’t hesitate to ask for references and follow up with them to get a sense of the advisor’s performance and client satisfaction. For a more detailed look at choosing a financial advisor in Detroit, read this article.

The bottom line

Navigating wealth management services in Detroit, MI, requires not just understanding the costs associated with hiring a financial advisor but also recognizing the value they bring to your financial journey. While fees are an important consideration, the right advisor offers much more than just investment advice; they provide peace of mind, strategic planning and a roadmap to achieving your financial goals.

In your search for a financial advisor, focus on finding someone who offers the right balance of expertise, service and cost efficiency. Remember, investing in quality financial advice can be one of the most impactful decisions for your financial future.

If you're ready to explore your options for financial advice in Detroit, or if you have further questions, feel free to reach out to us. Schedule a free consultation with a financial advisor right now. Our team is dedicated to helping you navigate your financial journey with confidence and clarity.