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June 21, 2024
PI Global Investments

Here’s My Average Client’s Net Worth

Lemon_tm / Getty Images/iStockphoto

Lemon_tm / Getty Images/iStockphoto

Thinking about hiring a financial advisor, but not sure if it’s worth it at your net worth? Different financial advisors charge different fee structures, and many specialize in working with lower- or higher-net worth clients.

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As you explore hiring a financial planner or advisor, keep the following pros and cons in mind.

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Average Client Net Worth

“I work for a financial advisory firm with roughly 1,500 households and $2.7 billion in assets under management,” explains portfolio manager and Chartered Financial Analyst (CFA) Nathan Winklepleck. “Our average client has $1.8 million, but that is skewed by larger accounts, such as one with $150 million. I’d say the median net worth is more like $1 million.”

Jay Zigmont, a Certified Financial Planner (CFP), specializes further. “At Childfree Wealth, we work with childfree people with a higher net worth. Our clients tend to average more than a million.”

“As the CEO of BlueSky Wealth Advisors, I’ve had the privilege of working with a wide range of clients,” says CFA David Blain. “We work with everyone from those just starting on their financial journey to high net worth individuals. On average, my clients’ net worth tends to range between $1 million and $10 million, though we also serve ultra-high net worth families with significantly larger portfolios.”

Chad Willardson, founder of Pacific Capital and long-time CFF (Certified in Financial Forensics), serves an even wealthier clientele. “At Pacific Capital, we exclusively work with those with a net worth of eight and nine figures or more.”

When Should You Hire a Financial Advisor?

Despite these averages starting with $1 million at some firms, remember that they’re just that: averages. Half of the clients likely have six-figure net worths.

“In my view, anyone could benefit from hiring a fee-only financial planner, particularly when they are young,” says Winklepleck. “That helps ensure that they are saving on taxes and making wise investment choices. However, low net-worth clients (i.e. sub-$100,000) should almost always go with a robo-advisor or some other low-cost investment custodian, such as Vanguard.

“Why? You’ll pay little in investment advisory fees, so you’re going to get almost nothing in service. If you do get service, that means you’re likely paying far more than a standard 1% fee — likely hidden in poor investment products, such as annuities and other insurance products. And, almost always at this level, the only advisors who will work with you are those just starting out; you should try to connect with someone that has at least five years of experience; ideally, more than a decade.”

Blain adds his own two cents: “In my opinion, it’s worth considering a financial or investment advisor if your net worth is around $500,000 or higher. At this level, financial decisions become increasingly complex, and professional guidance can provide substantial benefits in optimizing investments, tax strategies, and financial planning.

“For those with simpler financial situations or smaller portfolios — typically below this threshold–a robo-advisor might be a more cost-effective solution. Robo-advisors are excellent for providing diversified investment strategies with minimal fees, which can be particularly beneficial for younger investors or those with straightforward financial goals.”

Pros & Cons of Hiring an Advisor

Hiring a financial planner or advisor comes with one obvious con: paying their fee. However, you can pay a flat fee for help with planning, rather than an ongoing percentage for managing your investments. More on that shortly.

What other pros and cons should you consider before hiring an advisor? “The advantages lie in custom-tailored financial advice specific to your needs and building a trusted relationship with a professional who has experience in wealth management,” explains Willardson. “There usually aren’t any cons, but it’s important to make sure you work with a fiduciary who puts your interests first, not a broker just looking to make commissions by ‘selling’ your investments that aren’t a fit for you.”

Blain adds “Advisors offer personalized strategies tailored to your unique financial situation — something I’ve implemented through customized tax strategies, optimizing investments, and financial planning and estate planning services. However, the cons include higher fees and potentially minimum asset requirements. Human advisors also may have conflicts of interest depending on their compensation models, unlike robo-advisors which operate on a fixed fee structure.”

Beyond picking and managing your investments, advisors can also rebalance them and practice tax-loss harvesting to minimize your taxes. Perhaps most importantly, they can talk you off the ledge when you try to panic sell during a market downturn.

Starting with a Flat Fee Model

Many investors start wondering about hiring expert help as they reach a net worth of $250,000 or $500,000. They question whether the benefits outweigh the costs.

Fortunately, you don’t have to hand over all your money for professional management (and pay the attendant fees). You can pay a flat fee for periodic advice and help planning out long-term financial goals.

“You may be able to just get a ‘check-up’ with a CFP to identify what is working and what can be even better yet,” proposes Zigmont. “We offer a Childfree Wealth Check-up for $500, for example. In our check-up we gather a lot of information about your current situation, life, and goals. We then identify areas for improvement, areas where working with a professional may help, and areas where you can DIY.”

Willardson notes that “Having an experienced wealth advisor is important at any income level. If you are early on in your financial journey, having a plan is much more important than having someone manage your investments.”

That’s a theme that Zigmont emphasized as well. “Your money mindset and behaviors tend to have a larger impact on your financial success than the numbers themselves.”

Learn More: 29 Best Games That Pay Real Money in 2024

You don’t need a seven-figure net worth to get expert help. You just need a few hundred dollars to pay for a few hours of an expert’s time.

This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: Here’s My Average Client’s Net Worth

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