Less than half of people think medical insurance is good value for money – here are the best and worst providers

The number of people signing up for private medical insurance has hit a record high, but a recent survey has found that less than 50% of claimants believe they are getting good value for money.

Just 47% of people said their insurance was worth the price they paid, with the vast majority (84%) saying their premiums had increased in the last year, a study by Which? found.

The muted customer feedback meant the consumer champion was unable to name any companies as a recommended provider, but there were some that did better than others in the rankings.

WPA received the highest overall score at 76%, followed by Bupa with 64%.

At the bottom of the customer satisfaction table was Vitality Health, which lost points for its value for money and its clarity around the claims process.

Here’s a look at the Which? survey’s results:

Why are more people paying for medical insurance?

Typically, private medical insurance (PMI) covers non-urgent consultations, tests and procedures.

Policies don’t cover A&E care, and they tend to exclude illnesses that are considered to be “chronic” – but some plans make exceptions for specific illnesses such as cancer.

Of the customers surveyed by Which?, 71% said the most important feature when choosing their insurance was shorter waiting times, with the NHS struggling to cope with significant backlogs since the pandemic.

In April 2025, patients were waiting an average of 13.3 weeks for NHS treatment to begin – and this figure was the lowest it had been for two years.

“With NHS wait times still high, many consumers have turned to private health insurance to access faster treatment,” Jenny Ross, Which? money editor, told the Money blog.

“However, private medical insurance can be expensive and those looking to buy a policy will understandably want to make sure they are getting the right cover.”

Considering it? Here’s what you need to be aware of…

Firstly, the cost. Which? says policies commonly cost thousands of pounds a year, and they go up over time, particularly as you get older.

Insurers charge older customers higher prices because they expect them to make more frequent and pricier claims.

People aged 50 to 59 years old pay an average of £162 a month on their medical insurance, the survey by Which? found.

This rises to £173 a month for 60-69 year olds, and £244 a month for 70-79 year olds.

Those aged 80 to 89 paid an average of £305 a month.

Next, you need to find the right policy for you.

“It’s important to consider your priorities – for example, speedy access to routine treatments or diagnostic tests – and match this with the cover levels available,” said Which? money editor Ross.

No policy will offer unrestricted access to private treatment. All policies will cover and exclude certain conditions or treatments.

Which? said they will also typically apply limits – such as excesses, time limits or numbers of treatment sessions where cover is available.

“Policy wordings can be complicated and tricky to read, so if you aren’t sure, we’d recommend taking expert advice from a qualified broker,” Ross added.

Another complexity to look out for is changes to your cover happening behind the scenes.

Insurers keep schedules of approved procedures and fees, setting out the maximum costs they are willing to pay, along with a list of medical specialists they’ll work with.

If the insurer chooses not to approve treatment, you won’t be able to access it privately at all, or they could leave you to pick up the shortfall in cost.

Is there any way to save money on your insurance?

Ross said: “Once you’ve found the right policy, try haggling or reducing your excess on areas that aren’t a priority for you to bring down costs. Halfway alternatives do also exist if you’re looking for a more affordable option.

“For example, there are private healthcare schemes with networks of hospitals which charge a set monthly amount – regardless of your age or medical history – for access to diagnoses and some simple surgical procedures if NHS wait times are too long.”

Rights of reply

Money has contacted all the insurers named for comment.

WPA told us it was “delighted” with the results.

“In the current environment, customers are increasingly utilising their policies, valuing the peace of mind provided by timely access to high quality healthcare and the freedom to choose the healthcare professional best placed to meet their individual needs,” it said in a statement.

AXA’s director of distribution Richard Glassborow told us: “I am delighted to see members have praised AXA Health for clarity, speed and choice.

“We are always listening to member feedback and strive to continually improve our services, such as expanding online outpatient services to ensure members can quickly access the right care first time across more treatment areas.”

A spokesperson for Vitality said: “What our members think of us really matters. In this survey the sample size is less than 50 people, and while this insight is important to us, within larger surveys and places like TrustPilot, we see customer feedback place us alongside or above other insurers in the market.”

We didn’t hear back from the other firms before publication.

CNN —

Editor’s note: Watch CNN Original Series “Billionaire Boys Club,” detailing the greed-fueled landscape of 1980s Los Angeles where a group of young, ambitious men set out to make their fortune — but their lavish dreams quickly spiral into a web of deception, fraud and murder.

It’s the 1980s, and a group of young men have dreams of making a fortune.

When Joe Hunt reconnects with his former high school classmates in Los Angeles, he has promises of a new business venture that will make them rich. With visions of wealth and success, the young men are lured into what becomes a web of fraud — and a cautionary tale that devolves into murder.

CNN Original Series’ “Billionaire Boys Club” recounts this tale of greed from Wall Street. It’s a dark example of a kind of fraud that has reoccurred throughout modern financial history. It’s also a reminder of how aspirations of wealth can be exploited.

Ahead of the series premiere this evening at 9 p.m. ET, CNN spoke with three experts in economics and finance to better understand why greed is persistent in markets, what hidden risks might linger and how to protect your finances from fraudulent schemes.

History rhymes

After Hunt reconnects with his former classmates, including Dean Karny and Ben Dosti, the group starts a new social and investment club. At its core, greed drives their pursuit of wealth and power.

Greed has driven people’s actions throughout history, including in the world of finance, said Anat Admati, professor of finance and economics at Stanford Graduate School of Business.

“Greed is about wanting things to own, to consume,” Admati said. “It’s pervasive.”

Capitalism and markets are profit-driven by design. While that framework can produce remarkable wealth and growth, it can also be taken advantage of by bad actors. In the case of the Billionaire Boys Club, Hunt goes down a path that eventually spirals into deception.

Greed can be particularly pervasive in finance because promises of wealth can manipulate people’s emotions, Admati said. This can sway them to believe in get-rich-quick opportunities — and fall for Ponzi schemes.

“Money is a source of power and admiration,” she said. “The culture of wanting wealth and financial success is strong. Then it meets the human psychological feature of wanting to believe things, or wanting to trust people.”

While there are many cautionary tales of deceit, people often fall for fraud because they don’t think they could be the one who is being duped, Admati said.

“People are more likely to be tricked into believing things when they don’t understand the way claims that are being made to them can be manipulated at the backend,” she said.

Joe Hunt enters a Redwood City, California, courtroom for an arraignment in March 1988. AP

Hidden risks

The 1980s was an era known for greed on Wall Street, as detailed in the “Billionaire Boys Club” series; books including “Barbarians at the Gate,” by journalists Bryan Burrough and Joe Helyar and “Liar’s Poker” by Michael Lewis; and the 1987 movie “Wall Street.”

In the 21st century, varying degrees of financial deceit — from the Enron accounting scandal to the devastating consequences of massive Ponzi schemes like the one run by Bernie Madoff — continue to impact people across the country. Just last week, the US Securities and Exchange Commission announced it had charged a Georgia-based company with running a $140 million Ponzi scheme.

David Smith, a professor of economics at Pepperdine Graziadio School of Business, said it’s often the same, recurring themes of greed that take place in different frameworks.

“As an economist, one of the things we study very carefully is incentives and how they drive human behavior,” Smith said. “Individuals are driven by different motives, but one of them is to acquire wealth.”

Pure greed and the desire to acquire more wealth or experiences of financial hardship are reasons why a person might commit fraud, Smith said.

Bernie Madoff, known for bilking thousands of investors out of billions of dollars, arrives at Manhattan federal court on March 12, 2009. Chris Hondros/Getty Images

Energy trading firm Enron’s headquarters in Houston, Texas. The company’s 2001 bankruptcy filing was the largest in American history at the time. James Nielsen/Getty Images/FILE

And the rise of cryptocurrencies has opened investors to a plethora of new risks and potential scams, according to Hilary Allen, a law professor at American University.

While bitcoin and other crypto have proved profitable for some, there have been numerous instances of memecoins — a functionally worthless asset that trades on hype and often results in investors losing cash. Victims reported more than $5.6 billion in fraud related to cryptocurrency in 2023, a 45% increase from losses reported in 2022, according to an FBI report.

“There’s no good reason for it to have value other than the fact that you think that someone else will buy it from you in the future for more than you paid for it,” Allen said. “And that’s pretty Ponzi-like.”

From Wall Street in the 1980s to memecoins in the 2020s, a lack of oversight and regulation can create opportunities for bad actors, Allen said.

“Greed is not new, and greed in financial services is particularly not new, because that’s where the money is,” Allen said.

In April, the SEC announced it charged an individual for orchestrating a fraudulent crypto scheme that raised $198 million from investors. Ramil Palafox misappropriated $57 million of investor funds to purchase Lamborghini cars and items from “luxury retailers,” the SEC said, in addition to engaging in a “Ponzi-like scheme” until the fraudulent project collapsed.

“Financial markets are at least relatively transparent, whereas cryptocurrency, even though it claims it’s built on the backbone of full verification and public display of the blockchain, there are still a lot of opportunities for bad actors to take advantage of the lack of information that exists,” Pepperdine’s Smith said. “There’s also the lack of regulation.”

How to protect yourself

Greed can underpin wild stories of corruption and murder, including the Billionaires Boys Club. But greed and fraud can also arise daily, from phishing emails to online scams.

There are steps people can take to better protect themselves, Smith said. “If it’s too good to be true, it probably is.”

As for why people are drawn to learning about stories of greed and financial fraud, Smith said it gets to a core of human emotion that people can relate to. “I think we can all empathize with the allure of an opportunity that sounds like a shortcut to something,” he said.

Individuals have to gauge their own risk tolerance for investing in anything, whether it is stocks or crypto, he said, but “it’s always good advice not to expose too much of your underlying financial wealth to a new opportunity.”

“Make sure that you seek good financial advice before you do anything,” he said. “Talk with a financial advisor, your friends or family members. Oftentimes, the worst financial decisions are made in isolation, where people don’t vet their ideas or what’s being proposed to them with others.”

The S&P 500 includes 500 companies in various top-performing industries. Its broad representation means you’re not tying your funds to a tiny slice of the economy. Buffett likes it for everyday investors because it’s a simple yet effective way to spread your money around.

Index funds are investments that track the return of a market index, representing a particular section of the stock market. The Standard & Poor’s 500 Index is one such example.

In this day and age, you can earn passive income from more than just pet sitting or affiliate marketing. You can work smarter, not harder, and learn some investing basics from Buffett himself. If you’re looking for the simplest way to invest, he recommends the index fund .

“In my view, for most people, the best thing to do is own the S&P 500 index fund.”

As Buffett said at the 2001 Berkshire Hathaway annual meeting, “I think if you’re working with a small amount of money, you can make very significant sums.”

He believes this freedom to choose small companies makes small-scale investing powerful. More importantly, anyone can follow this advice. Choose an affordable company you believe in, then wait for it to work its magic and make lots of money.

Buffett didn’t start with millions to invest or a social media platform to grow his wealth as an investing expert influencer. He describes his early days as “working with a tiny, tiny amount of money,” when he would choose a promising small company and invest in its growth.

Buffett’s 60-plus-year career has left the personal finance world with some of its favorite quotes and most evergreen advice. Check it out below, and here’s some more too.

That description alone would neatly sum up Warren Buffett , the “Oracle of Omaha” and the current fourth richest person in the world with an estimated net worth of $162.1 billion. Buffett has a gift, and while he may be the largest shareholder of the famous Berkshire Hathaway, he still shares some of the most relatable money advice that anyone can use.

For You: 25 Places To Buy a Home If You Want It To Gain Value

To make extra money, you may feel like you’ll have to take on a bunch of side gigs or find a new job that earns a higher paycheck. However, you may just need to take the advice of someone who knows his way around a profit margin.

Story Continues

The relative low risk of this investment is backed by this famous Buffett quote: “The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.”

Buy Bonds

“Put 10% of the cash in short-term government bonds.”

If you’re looking for investment strategies, why not do what Buffett does with his money? As Buffett told shareholders in 2013, he has instructed the administrator of his wife’s trust to split the funds 90/10: 90% in the S&P 500 and 10% in government bonds.

The U.S. government offers two types of bonds: treasury and savings. Treasury bonds cost a minimum of $100, while savings bonds cost $25 and up.

Understand Your Investments

“Risk comes from not knowing what you are doing.”

Knowledge is power when it comes to your money. You don’t need to know everything about the market or the industry you’re investing in via websites and apps. Most people would never be able to invest if that was a requirement.

You do need to understand the basics of how an investment works. You’ve already taken the first step by learning about index funds and bonds. If you have another investment interest, start researching it. You can always ask a financial advisor for help if you need it.

Don’t Follow the Crowd

“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

Buffett has never made investment decisions by following trends. He made billions by finding companies he believed in and holding his shares in them for as long as it made sense.

If you understand the products in your portfolio and why they’re smart, you don’t need to follow investment trends.

Keep Cash Available

“When bills come due, only cash is legal tender. Don’t leave home without it.”

Buffett believes in his investments but knows the market can be volatile. In 2008, when its competitors were faltering, Berkshire thrived because it had plenty of access to cash.

That money was in cash equivalents, a short-term investment that you can cash in relatively quickly. Think of certificates of deposit and money market accounts, which you can open at most financial institutions.

One word of caution: CDs tend to charge fees if you withdraw early. There are always high-yield and traditional savings accounts if you need quick access.

Pay Off Your Credit Cards

“People should avoid using credit cards as a piggy bank to be raided.”

When a friend asked Buffett what to do with the money she came into, she likely expected investment advice. Instead, Buffett told her to pay off her credit cards.

As Buffett explained, credit cards have high interest rates. So before you start renting your car to advertisers, dog walking or taking online surveys for a few extra bucks, you may be able to free up some extra cash by getting out of a debt spiral.

Think Value, Not Price

“Price is what you pay; value is what you get.”

When Buffett gave his shareholders this advice in Berkshire’s 2008 annual letter, he quoted his old friend and mentor Ben Graham. Graham believed in choosing investments based on the target company’s value, not the stock price.

Sound familiar?

Buffett adopted Graham’s belief in buying based on a company’s worth. He determines that worth based on how much money the company will generate for shareholders down the line — not how much he’ll pay for it now. That advice applies to everything from Apple stock to iPhones.

It’s not about “how much will I pay?” but “what will it do for me?”

Buy Quality at Low Prices

“Whether we’re talking about stocks or socks, I like buying quality merchandise when it is marked down.”

Buffett’s appreciation for value extends to a good deal. The less he can pay for a quality stock, the better. Quality is still the priority since it isn’t a good deal if it doesn’t benefit you down the road.

Any bargain hunter can take this advice to heart. You don’t have to buy cheap products to save money. You only need to find worthwhile products and buy them on sale.

Learn More: 10 Genius Things Warren Buffett Says To Do With Your Money

Act on Opportunities

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

Buffett fans love this quote for a good reason. It’s an easy reminder that the market doesn’t usually present you with “perfect” conditions, so you need to watch out for them. These moments are when it “rains gold.”

When things look good, Buffett scoops up as many great-value stocks as he can. He still pays attention to stocks with long-term value, but he might spend more on them than usual. That’s what “put out the bucket” means.

Have a Margin of Safety

“Don’t try and drive a 9,800-pound truck over a bridge that says, ‘Capacity: 10,000 pounds.’ Go down the road a little bit and find one that says, ‘Capacity: 15,000 pounds.’”

The margin of safety is the difference between a stock’s sale price and its estimated value. That’s math you might not do as a beginning investor, but it’s valuable advice.

Suppose you have $1,000 left each month after paying your bills. You know investing has a higher potential return than a savings account, but you also know it’s riskier. You only have half a month’s worth of expenses in your savings, so you can’t afford that risk. You put the money in savings to increase your margin of safety.

Focus on the Game, Not the Score

“Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard.”

Buffett gave plenty of good advice in his 2013 shareholder letter, which included six basic rules of investing. This one is good news for everyday savers and investors. It means you don’t have to keep an eagle eye on stock prices — or even check them every day. You only need to keep a safe cushion and play the long game.

Not sure about the long game, either? That’s what brokers and advisors are for. You can even sign up online to work with a “robo-advisor,” which uses technology to manage your portfolio based on your goals.

Keep It Simple

“You don’t need to be an expert in order to achieve satisfactory investment returns. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘no.’”

This final quote encapsulates Buffett’s most important advice for beginning investors. With reasonable expectations and a portfolio that makes sense, given your experience level, you can do well for yourself. The key is to be the tortoise, not the hare. Avoid get-rich-quick schemes and trust the market’s slow and steady progress.

It worked for Buffett, and that’s an excellent endorsement.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Warren Buffett’s 13 Easy Money Tips That Can Work for Anyone

A financial advisor can give valuable insight into what you should be doing with your money to reach your financial goals. But they don’t offer their advice for free. While the typical annual financial advisor fee is thought to be 1%, according to a 2023 study by Advisory HQ, the average financial advisor fee is 0.59% to 1.18% per year. However, rates typically decrease the more money you invest. You might be wondering whether it’s worth paying a financial advisor, but that answer is very personal to you.

Do you need help finding a financial advisor? Try using SmartAsset’s free matching tool.

What Financial Advisors Do

Generally speaking, financial advisors help manage your money and guide your financial decision-making. They work with you in creating a financial plan designed for your unique goals. For example, that might include saving $1 million for retirement. Similarly, it could involve building a college savings fund so your children can graduate without student loan debt.

What a specific advisor does can vary. It depends on whether they specialize in a particular area of money management or hold certain financial certifications. For instance, a Certified Financial Planner™ (CFP®) typically offers comprehensive financial advice to their clients.

Since these advisors take a broad look at your financial situation, they could help you with things like creating a debt payoff plan and building emergency savings. In the long term, a CFP® can also help you plan whether you have enough life insurance coverage and know what investments belong in your retirement strategy.

A financial advisor who holds a chartered financial analyst (CFA) designation, on the other hand, may focus on investment advice. They could help with picking stocks or mutual funds. Also, they might assist with strategic portfolio moves or stock market analysis. Which financial advisor you work with largely hinges on what you need them to do. Your choice can also determine whether you pay 1% for a financial advisor, more than that or less.

Financial Advisors vs. Financial Planners

Is there really a difference between a financial advisor or a financial planner? As discussed above, a financial advisor can provide a wide range of services to grow or protect your wealth. A financial planner is one type of financial advisor that is commonly used for their specialty of creating a comprehensive financial plan to help you achieve your long-term financial goals. Some financial planners also help you manage your investments, but it’s not always the case.

Is It Worth Paying a Financial Advisor 1%?

The value of paying a financial advisor 1% is going to vary by person. But, if you’re already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they’ve helped you accomplish. For example, if they’ve consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain. The same could be true if they’ve helped you to finally pay off a large amount of debt or reach a major money goal.

This can be a trickier benchmark to use if you’re not working with an advisor yet. In that case, perhaps check the advisor’s track record and reputation. An advisor with rave reviews from current or past clients has a mark in their favor. They’re more likely to be earning their keep, fee-wise.

If you don’t have an advisor yet and you’re concerned about fees, it’s important to think about your goals. If you have very basic financial management needs, then consider an advisor that charges lower fees or only charges by the hour. You could also choose a robo-advisor to start, then move to a traditional financial advisor as your needs change.

Advisor fees can lower returns, but that doesn’t necessarily mean you’ll earn more than investing on your own. Our calculator compares your net worth potential with and without a financial advisor:

How Much Could a Financial Advisor be Worth to You? Calculate how much a financial advisor can potentially add to your net worth over time given your circumstances. Current Age Retirement Age Current Income Current Net Worth Advanced Calculate Total Potential Lifetime Value Added by a Financial Advisor $– Final Net Worth with an Advisor $– Final Net Worth without an Advisor $– About This Calculator This calculator is based on the assumptions and equations detailed in SmartAsset’s whitepaper, “The Value of a Financial Advisor: What’s It Really Worth?”. Users can input their own data – such as their current age, planned retirement age, income and investments – to find the projected value a financial advisor could be worth over their lifetime. Advanced fields let users customize other inputs such as their investment performance, the rate of inflation over time, their savings rate, and rate of withdrawal in retirement. Assumptions Assumptions come from SmartAsset’s whitepaper, “The Value of a Financial Advisor: What’s It Really Worth?” For years left until retirement, the client is assumed to be contributing a percentage of their income to their investments. These investments are assumed to grow over time, while fees are deducted in cases where the client maintains the services of a financial advisor. In either case, values account for inflation and are presented in today’s dollars. During retirement, savings contributions are assumed to end and withdrawals from the investment pool are assumed to be 4% unless user inputs dictate otherwise. Default values reflect an assumption that a retiree will reallocate their investments to a more conservative mix with a lower rate of return. Fees are still removed in the case the client has an advisor and inflation is accounted for. The default value for inflation (2.56%) is based on annual historical data for 2000 through 2023. The default value for investment performance is based on S&P 500 performance (investment growth during career) and Moody’s AAA rated corporate bonds performance (investment growth during retirement) for January 2000 through August 2024. The default annual savings rate (5.69%) is based on historical data from the Federal Reserve for the same time period. An advisor is assumed to yield an additional annual average of 1.0495% of a client’s income in tax savings during their career and 2.47% premium in annual returns, whether through investment allocations and performance, general guidance and coaching, or other more custom areas of financial benefit. Advisor fees are removed from the net worth over time. Fees are 1% annually for people with an inputted current net worth of less than $1 million. At $1 million starting net worth and above, annual fees are 0.75%. The duration of the relationship between the client and the financial advisor is assumed to end at age 77. A divergent assumption from the whitepaper in order to allow senior users access to the calculator is that if the user inputs their current age as 68 or older, the duration of the relationship is assumed to be 10 years. This hypothetical example is for illustrative purposes only and does not represent an actual client or specific security. Actual results will vary. This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest. Articles, opinions, and tools are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor concerning your individual situation. SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries (“Adviser(s)”) with a regulatory body in the United States). Articles, opinions, and tools are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor concerning your individual situation. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments based on that index. Indexes do not pay transaction charges or management fees. The above summary/prices/quote/statistics have been obtained from sources we believe to be reliable, but we cannot guarantee their accuracy or completeness.

What Percentage Fee Is Too High for a Financial Advisor?

The answer to how much is too much when looking at financial advisor fees is really subjective, but there are some generalities to follow. If you’re getting a return that you feel is worth the fee, then you may not be paying too much.

While 1.5% is on the higher end for financial advisor services, if that’s what it takes to get the returns you want, then it’s not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn’t the high end. You need to decide what you’re willing to pay for what you’re receiving.

Can I Manage My Money on My Own?

Whether you can manage your own money is going to depend on your financial knowledge and experience with different types of investments. It will also depend on how much money you have to invest. If you have strong financial acumen and experience investing, then you might be fine investing your own money. If you have less than $50,000 of liquid assets, then you may also want to consider going at it on your own, as the fees might not be worth it.

With that said, financial advisors can bring a wealth of information and experience to the table that can make a huge difference in your potential return. If you have a substantial amount of money or just don’t have the required experience, then you may want to consider hiring a financial advisor to take care of your assets.

How Long Should You Stay With a Financial Advisor?

The length of time that you work with a financial advisor can impact both how much you’ll pay as well as how well you can potentially meet your financial goals. If you have a long-term retirement plan with your advisor, but don’t work with them for more than a year or two, it could be difficult to keep any momentum that you’ve built going.

The right decision is going to depend on your unique financial situation and how much you can afford to pay an advisor. If all goes well, then the length of time shouldn’t be an issue to you, financially, because the returns can more than pay for the advisor’s contributions.

How Financial Advisors Make Money

Not all financial advisors offer the same type of financial advice. They don’t all use the same fee schedule, either. Depending on the advisor, their fee structure may be put together in one of these six common ways:

Hourly rate

Flat fee

Quarterly or annual retainer fee

Percentage of the client’s assets under management (AUM)

Commissions only

Combination of commissions and fees

Fee-only advisors charge based on the services they offer. So they might charge you by the hour or as a percentage of your assets. They may also use a retainer fee on a flat-fee basis for individual services.

A fee-based advisor makes money by charging a combination of fees and earning commissions on investments and financial products. So you might pay your advisor the average hourly fee of $120 to $300 per hour, according to Advisory HQ. But you may also pay them a commission fee each time you purchase an investment they recommend. This commission often deducts directly from the amount you invest.

Keep in mind that these fees apply to human financial advisors. If you’re using a robo-advisor, the fees work differently.

Robo-Advisors vs. Financial Advisors

Robo-advisors offer financial advice that’s based on an algorithm. Some offer human financial advisor support. However, most of the time a computer program essentially manages your investments. Since there’s less hands-on human involvement, robo-advisors tend to charge fewer fees than traditional financial advisors.

For example, instead of paying a hypothetical 1% in fees annually to a human advisor, you might pay 0.25% to 0.50%, which is what the aforementioned 2023 Advisory HQ study found the typical robo-advisory fee range to be. However, it depends on the number of assets you have under management. Some robo-advisors can charge fees that are lower or higher, but 0.25% to 0.50% is a typical fee range.

If you’re asking “Is it worth paying a financial advisor 1%,” robo-advisors may seem like an attractive cost-saving alternative. But ask yourself what level of service and advice you expect for your money.

If you’re comfortable with a hands-off investment experience where an algorithm drives decisions, then a robo-advisor could be a less expensive option. Some platforms even charge no management or advisory fees for investors whose assets fall below a certain threshold.

On the other hand, you may prefer to have someone who can answer your questions. Also, you might make adjustments to your portfolio based on life changes or seek advice on specific investments. A human advisor can deliver that. Only you can decide whether an advisor’s help and advice justifies the fees you’re paying.

Financial Advisor vs. Robo-Advisor vs. DIY

Financial advisors, robo-advisors and DIY investing all have different costs and potential returns. To see how each option affects growth, let’s compare them using a $500,000 portfolio.

Assuming that a traditional financial advisor will charge you a 1% fee, it would cost $5,000 on a $500,000-portfolio. While this lowers returns, an experienced advisor could also add value by improving investment performance through tax strategies, risk management and rebalancing. So, if they increase returns by 1% to 2%, they would offset the fee. With a 6% to 10% market return, the portfolio could grow between $30,000 to $50,000 annually. But after the $5,000 fee, the net return would be between $25,000 and $45,000.

Robo-advisors, on the other hand, are a lower-cost alternative. Assuming a 0.25% fee, this would cost $1,250 per year on the same portfolio. These automated platforms manage asset allocation and rebalancing, with expected market returns of 6% to 8%. Estimated gains are slightly lower because robo-advisors often use standardized and more conservative investment strategies to maintain stability. So, with a return of 6% to 8%, you could earn between $30,000 and $40,000, leaving $28,750 to $38,750 net after fees. You should also note that automated investing typically offers limited personalized financial planning, which might not suit portfolios with more complex needs.

Finally, DIY investing removes advisory fees altogether. This means you will keep all your returns. So, if a DIY investor earns market returns between 6% and 10%, their portfolio could grow by $30,000 to $50,000 per year. Comparatively, financial advisor’s 1% fee would reduce net returns between $25,000 and $45,000, while a 0.25% robo-advisor fee would net $28,750 to $38,750. DIY investing can offer the highest potential returns, but it also carries the greatest risk: Mistakes in asset allocation, emotional decisions, or tax inefficiencies could eat into your gains, depending on your level of expertise and market performance.

Bottom Line

When weighing an advisor’s fee, consider your desired return on investment. Ask an advisor if they’re fee-based or fee-only. Question any advisor who doesn’t share information about fees. Review the fees you’re paying annually and compare them to the services you’re receiving. That can indicate if your advisor is still a good fit. It can also help to compare the fees of your advisor with others who offer similar services.

Financial Advisor Tips

Investing isn’t the only area a financial advisor can help you with. There’s a range of financial matters that can benefit from expert advice. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Aside from researching the fees an advisor charges, be sure to research their background, as well. That includes their professional credentials, licensing and experience as well as any regulatory actions or complaints that have been filed against them. FINRA’s free broker-check tool can help you with vetting prospective advisors.

Next Steps

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