What is the right price for financial advice? Well, that depends on what you are looking for and what the qualifications are of the person you seek advice from. And in today’s world, there are an abundant array of choices for you to choose from, but you need to do your homework before you hire anyone. There are robo-advisers, brokers, registered investment advisers and financial planners. Some charge a small percentage of the assets they manage while others may charge fees based on the level and complexity of your needs. Regardless we will examine the fees and characteristics of each of these types of financial advisers.
Now there was a law put forward that was aimed at protecting you when it comes to financial professionals called the Fiduciary Rule, which has been curbed somewhat by the recent administration. Basically, that rule states that any financial professional must place the interest of their clients ahead of their own financial needs. In the past, many financial professionals would not consider what was best for their clients but rather what would generate the most in management and trading fees. No matter what type of financial professional you hire, hire one that follows the Fiduciary Rule regardless of it being a mandatory law or not as all financial professionals should place your welfare ahead of their own.
Then depending on how much assistance you need may play on what type of professional you should hire. Some professionals may charge anywhere between $200 and $400 an hour to prepare a plan that you will implement on your own. Others may charge several thousand a year for on-going implementation of your plan by the professional. And then some professionals charge a percentage from as low as 0.25% up to 2% of the assets they manage as their fees on an annual basis. Regardless, these factors need to be considered when picking a financial professional. We will look at designations as we examine each of the four types of professionals.
Robo-Advisers are relatively new, and younger people are using their services. These types of professionals use a series of questions and how you answer them to decide how best to make your investments. The investments that they utilize are indexed exchange traded funds or ETF that typically have low expense fees. And robo-advisers charge anywhere between 0.25% to 0.50% of the assets under management with the firm. But many users of these services also would like a real person to deal with as well, and hybrid-advisers are becoming more popular as well. Here you can use the robo-advisor as well as talking to a non-dedicated specialist for a slightly higher fee, generally between 0.3% and 0.90% of assets under management. The downside to robo-advisers is that even with the hybrid-advisers will not consider assets you may own that are outside of the firm’s control such as a workplace 401(k) plan.
Brokers are another type of financial professional that most people have heard of or are familiar with as they have been around for a very long time. Here the professional is generally paid by commissions on the trades they execute on your behalf while not really making or giving advice on what investments should be made by their clients. Some full-service brokerage firms may indeed make recommendations on buy and sell orders for investments that they cover in-house. These professionals may charge a portfolio management fee in addition to any commissions that they charge to execute the trades on your behalf. All total these fees and commissions can range anywhere between 1% and 4% of the portfolio depending on what assets are held in the actual portfolio with some such as annuities adding to a higher paid percentage. However, the average you can expect to pay for a broker to assist you with your financial affairs is between 1% and 2.5% a year.
Registered Investment Adviser is the third class we will take a brief look at in this post. Here the professional actually does provide investment advice and may even take a hands-on role in the management of your portfolio. These professionals will make investment decisions based on your goals and how best to meet them over a period of time. Here the fees paid may and are generally based on the size of the assets they manage with more assets equally a lower percentage fee, though some go as high as 2%. The registered professional adviser is geared towards someone who needs assistance keeping on the right track with regards to their financial needs and goals.
Financial Planners are the fourth and final group of professionals we will examine. Anyone can call themselves a financial planner but if you want the best and most ethical search for planners that have the Certified Financial Planner (CFP) designation attached to their name. These individuals will be able to assist you with all of your financial planning needs. They can assist you with investments, estate planning, budgeting, paying for college and everything in between. Here it is best to hire a financial planner that is a fee-only which all CFP’s are. And also, find one that adheres to the Fiduciary Rule which all CFP’s do. Also, many good planners will offer a set of fees for only the services that you require and need. This makes them ideal for people who may need help in one area and not another allowing them to pay only for what they need. A planner’s fees may be $200 to $600 an hour, or a set fee for a plan that is tailored to your needs say for $2,500. They even have planners that are on retainer for anywhere from $3,500 to $7,500 a year and up.
No matter what type of financial assistance you need there is a planner just for you. All you need to do is find them and then ask them the right questions to satisfy your concerns. Always check with the regulatory body that governs that individual and see if there are any complaints filed against them. Ask for references and check to see how satisfied people are with them. But no matter what use a professional that you are comfortable with and get along with. That is the key to a successful relationship between a financial professional and you.
If you need more information or require additional assistance, feel free to leave a comment here or contact me privately.
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Of course, the book is still available in physical format on Amazon.com for the price of $9.99 and may be accessed through the short link provided. Now a little about the book:
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