How Much Should Financial Advisors Charge for Stock Market Analysis?

February 13, 2021 by

Advisor Wealth Mastery Team

What if you were cutting into your profits with every single client?

For financial advisors, it is critical to charge the right amount for services, particularly stock market investments. But many advisors don’t charge enough, effectively cheating themselves out of major profits.

That brings us to a simple question: how much should financial advisors charge for stock market analysis? The answer is fairly complex, but our complete guide will help you discover the answer.

Stock Market Analysis: How Much Should It Cost?

If you’re reading this, you have a straightforward question: how much should you be charging for your stock market analysis? But the answer is like a late-night Facebook relationship status change: “it’s complicated.”

The truth is that there are many different factors that determine how much you should charge. This ranges from the depth of your analysis and time spent researching to your specific market and your specific competition.

Does that mean it’s impossible to answer the question? Not at all! But it’s a question that only you can answer, and our guide will help walk you through everything you need to know to come up with the right amount to charge.

Why Is It Hard To Nail Down a Number?

With that in mind, you probably now have a follow-up question: why is it so hard to nail down a specific number? The honest answer comes down to the difference between your own valuation of your services and your clients’ perceived valuation of your services.

For example, you could treat this as a simple math problem: research the going rate for stock market analysis in your area and then determine an average amount. You can then adjust that average amount up or down as you see fit.

In reality, though, the process is more complicated. Your existing clients may balk at a price hike because they don’t see you as offering any more services or value than you did before. And prospective clients may still flock to the competition due to other factors (like superior marketing).

Our guide is going to help you determine a new amount for stock analysis that is right for you, your area, and your clients. But our chief advice when it comes to raising your rates is to take things slow and see how it affects your business.

Keeping Up With the Competition

The “good news” about finding the right amount to charge is that you don’t have to reinvent the wheel. As we noted before, you can start by investigating how much your competition charges.

Keep in mind that the numbers don’t tell the full story, though. If one of your competitors is charging a really high amount, they may be offering additional services or more in-depth analysis than you do. Similarly, a competitor that charges a surprisingly low amount may be offering a fairly “surface-level” analysis compared to what you currently offer.

Obviously, you can research what their analysis entails as well as the final dollar amount of those services. But it’s important to complete a robust investigation of your competition before you end up charging too much (or too little) for your expert analysis.

Fair But Competitive

Let’s say that you now know exactly what your competition is charging and the exact range of their services and analysis. What are you supposed to do with this information when it comes to how much you charge?

While it’s easier said than done, the trick is to charge an amount that is both fair and competitive. You need to be competitive, of course, to avoid underselling yourself and your services. But to get the edge over the competition, you want to keep prices fair and attractive to your consumers.

To make those prices seem more attractive, make sure that your website and social media is very transparent about what your stock market analysis entails. Thorough and transparent information helps with SEO and bringing in new clients while also controlling their expectations about the entire process.

Now that you know a bit more about how to narrow down the “right” price for your stock market analysis, let’s review some of the different price structure options and how they might affect what you charge for your advice.

Assets Under Management Umbrella

The elephant in the room about how much you should charge for stock analysis is another question: what else are you already doing for this client?

For example, you might have an Assets Under Management arrangement with some of your larger clients. This means that the client is trusting you to help manage the entirety of their assets. In turn, it is fair for you to charge anywhere between 1% to 2% of their total asset amount.

This kind of arrangement is often expensive for clients and coveted by financial advisors. And if you have an AUM arrangement, then managing investments and offering stock market analysis should be part of the existing package. If you try to “nickel and dime” them with extra fees, you might end up scaring your most profitable clients away!

Commission-Based Fees

What is the most “common” way for a financial advisor to charge for stock market advice? Usually, you would charge the client a commission-based fee for this service.

In this sense, the commission-based fee covers a lot of ground. This is the same kind of fee you would offer if you were recommending any other type of investment.

How much should you charge as a commission? Typically, this fee ranges from 3% to 6% of the client’s investment. And while you can adjust that percentage up or down, keep in mind that many clients may be wary of commission-based fees.

That’s because some advisors make recommendations that focus on their own personal profits rather than what is best for the client despite fiduciary responsibilities. In the long run, you will gain more clients and greater client loyalty by putting their interests ahead of your own. At the end of the day, your business is all about relationships rather than mere profit.

Your Hourly Rate

Remember when we mentioned that stock market analysis may be relatively deep or relatively simple? For something on the simpler side, consider charging your client an hourly rate.

This is a great arrangement if a client simply wants to meet over coffee and discuss a few quick stock ideas with you. In this event, you did not have to perform any in-depth research or analysis and can instead rely on your existing knowledge of these stocks and the overall market.

Obviously, some advisors charge more than others. Hourly fees can range from $150 to $400 per hour. Make sure that your hourly rate is an honest reflection of the work you put in, though, especially if hourly clients make up a large portion of your business.

Charging a Flat Fee

Many times, clients want more than “just” stock market analysis. In those situations, the stock analysis may come as part of your general review of their portfolio and recommendations about the future. In that case, you might be better off charging a flat fee.

For many financial advisors, a flat fee ranges between $1,000 and $2,000. Again, this is for a fairly surface-level session where you have reviewed their portfolio and are making simple recommendations. If you end up getting into crunchier stock market matters that require additional independent research, you may be better off going with one of the other pricing models we have reviewed.

Fee-Only

Sometimes, what you charge for stock market analysis is a reflection of your entire business model. A great example of this is financial advisors that market themselves as “fee-only” advisors.

In reality, “fee-only” advisors may vary greatly when it comes to the services they provide and how much they charge for those services. The “fee-only” term merely affirms that the advisor does not receive commissions or other compensations based on the sales of particular financial products.

Otherwise, fee-only stock analysis would be charged by the hour, by flat fee, by AUM, or even a combination of different methods. But marketing yourself as a fee-only advisor can be a savvy way to stand out from the competition simply because many clients worry about getting a financial advisor who only cares about profit.