What's a fair price for a Financial Plan?

[Cheesehead]

I was quoted from a certified CFP, NAPFA, Garrett Network member, hourly fee only planner, about 15 hours at $180 per hour ($2700) to create an asset allocation plan for my wife (55) and myself (59), to get us on track to retire within perhaps the next five years. Once a year he would do a tune up for around $1400.

Our investment piggy bank is around $800,000 in a wide assortment of vehicles based on newsletters I follow and need the advice of a pro. DW is a teacher with various pension options and I have various SS scenarios that are unusual because in our state the wife can't collect SS with a teacher's pension.

So my question is, do you think this is a fair price? I only want to hear from folks who have dealt with fee only advisors in similar situations. Please don't respond with suggestions about doing it ourselves (which is an option I am working on). I am hoping to use this board to learn from people who have dealt with fee only planners.

Thanks

 

[growing_older]

It's in the ballpark I've been quoted. The problem is I've never seen a plan as good as the do it yourselfers, bogleheads, or Vanguard's free service provides. These paid for plans seem to be heavy on page count and recommendations to update periodically (for an additional fee) and skimpy on practicality.

in a wide assortment of vehicles based on newsletters I follow

I suspect that's your problem.

 

[LOL!]

An asset allocation plan is not a financial plan.
And a financial plan is not an asset allocation plan.

So what are you getting?

Insurance?
Wills?
Estate planning?
When to take Social Security for him and her?
Giving to charity?
Asset protection?
Asset location?
Tax planning?
Need for single-premium immediate annuities? Laddering there-of?
What to withdraw, when to withdraw?
Tax-loss harvesting?
Rebalancing?
What else?

 

[Helen]

I think I paid about $3,200 for our basic plan from a Garrette planner. It was really bad. The report was full of errors - the tables didn't have column headers, there was data missing, the Social Security estimate was wrong by over $10k per year if collecting at 62, the estimate for Social Security if we worked till 66 was bogus (I never gave her the information to compute it), the pension income was wrong, etc. I got my money back.

You can hire people to come up with a plan or to give you guidance, but unless you understand what they are doing you won't know if they are correct.

 

[REWahoo]

I only want to hear from folks who have dealt with fee only advisors in similar situations.

OK, I did.

So my question is, do you think this is a fair price?

Might be, but barring a plan as bad as the one Helen got, I doubt if you'll know if what you end up with is trash or treasure. You'd need to educate yourself to know, but then if you do that you won't need to pay an advisor...

Catch 22ish, eh?

 

[brewer12345]

As I take a break in working on the ultimate locavore dish (Southwest "Limb Chicken" Stew; yes I lead a gourmet redneck life in between godawful days at my pointless job), let me offer you two cents from the other side of the table. I have all the credentials and experience (and then some) to do the work of your planner. If I were to get bored at my extremely low risk and extremely dull job and decide to deign to work for one of the local wealth management firms, I would guess I'd be snapped up as quickly as I could shave and put on a suit. I would imagine that they would at most pay me half of what they brought in gross on my mental labors/planning. I would not even dream of considering taking such a job for less than 125k or better. How many clients like yourself does the firm need to bring in to generate 250+k revenue annually on one planner's 2000 hours a year of working hours? Not hard to back into what they would charge.

 

[Tyro]

An asset allocation plan is not a financial plan.
And a financial plan is not an asset allocation plan.

So what are you getting?

+1 When we hired a CFP, along with a couple of preliminary questionaires, we were given a checklist of items that we wanted help with, which I assume went towards figuring out how many hours the CFP would have to put into our "session". We were also told upfront that a considerable amount of the estimate would depend on the completeness and organization of information we were to provide. Our list of items was quite short, and we put more time into making copies, colating, etc. (and additionally putting it all on a flash drive) than the CFP did in working on our whole "job". We included a summary sheet not specifically requested, but was basically our whole net worth on a single page, which the CFP commented was the most useful & time-saving document we supplied.

The estimate was about 10 hrs., which in retrospect (considering the amount of boilerplate for stuff we didn't want or care about) was IMO still high for our situation, even though ~4 hrs of that was the presentation.

After going through the process with the CFP, I found this group, and began playing around with FireCalc, ORP and some of the other online packages. I'm still a tyro, but if I were as proficient with these packages (or a more sophisticated professional package like the ones they use) and the process as a professional should be, and given the completeness and accessibility of our input info., I think the CFP probably (IMO&E as an estimator) spent about 2 hours on our stuff, and maybe another hour tweaking. So 2 hrs ("free" get acquainted session) + 3 hrs (actual work) + 1 hr. (cranking out hardcopies & colating our deliverables) + 4 hrs (presentation) = 10 hrs. .... Maybe it wasn't all that high, but then that "free" get acquainted session wasn't really free (unless we didn't go through with the process).

I try to estimate high on time, but I'll defer my time estimates to any professionals here who know much more about this business and the time it takes than I do.

We also chose a CFP who, despite having sufficient experience and a client base of people similar to us, worked out of a home office & had no employees, (very low overhead) so hourly rates were considerably lower than those with office space & employees.

I've also been reading a lot about AA (which is, I think, a process rather than a task), and while there are as many theories & opinions as there are experts, one of the most interesting ideas I've seen floated thus far is this one: Iowa Center for Wealth Management » Blog Archive » Retirement Portfolios: Skip the Pie and Try the Cake

Tyro

 

[donheff]

A little before retiring I read up on financial plans and drafted my own. I engaged a fee only advisor to review the plan. I can't remember what I paid her but I believe it was about $500. She wrote that the plan appeared well thought out and made several decent suggestions about AA. Shortly after that I discovered this forum and got better advice here. Speaking with an advisor can be a helpful reality test if you are not confident in your own skills but it is ultimately a lot more cost effective and reassuring to learn enough to DIY.

 

[MichaelB]

What matters isn't the price, it's the plan. If it is built carefully, well thought out, shows the steps needed to achieving your financial goals, and specific measurements that allow you to track your performance and make adjustments, it is probably well worth what you are being quoted.

If it doesn't have these things it also doesn't have much value to you, so even at half that price it probably isn't a good deal.

 

[BOBOT]

++1 to LOL & MichaelB's comments.

A one-shot expenditure for a dispassionate analysis is well worth it, IMO, if the adviser shines a light on things you haven't thought about- in our case making withdrawals from my IRA before RMDs kick in, for example.

The cost your guy quoted sounds reasonable, but I would ask him to provide a stipulated scope of work. And you should help define that scope by giving him a list of specific questions you need answered, as well as all the well-organized information you have relating to your situation. Be pro-active. Challenge him to explain the reasoning behind his recommendations.

I'm less enthusiastic about yearly "check-ups".

 

[FinanceDude]

As I take a break in working on the ultimate locavore dish (Southwest "Limb Chicken" Stew; yes I lead a gourmet redneck life in between godawful days at my pointless job), let me offer you two cents from the other side of the table. I have all the credentials and experience (and then some) to do the work of your planner. If I were to get bored at my extremely low risk and extremely dull job and decide to deign to work for one of the local wealth management firms, I would guess I'd be snapped up as quickly as I could shave and put on a suit. I would imagine that they would at most pay me half of what they brought in gross on my mental labors/planning. I would not even dream of considering taking such a job for less than 125k or better. How many clients like yourself does the firm need to bring in to generate 250+k revenue annually on one planner's 2000 hours a year of working hours? Not hard to back into what they would charge.

That easy, huh?

 

[pb4uski]

I have only gone through the process with Vanguard so it was free. If you have your information well organized, then I think 15 hours of work for an experienced planner is more than what would be needed. The $180 an hour doesn't strike me as excessive (nor as a good deal either).

This all assumes that you get someone who knows what they are doing and has expertise in your specific issues. While I have used Vanguard as a check of my thoughts, I am more DIY and analyzed the pensions options myself and plan to use socialsecuritysolutions.com or some similar service when we get towards SS age.

If you have Quicken Deluxe or higher, the Lifetime Planner is a good easy-to-use tool for doing a basic retirement plan and looking at what-ifs and organizing the information that you will need if you have someone do it for you.

 

[EvrClrx311]

You can hire people to come up with a plan or to give you guidance, but unless you understand what they are doing you won't know if they are correct.

+1

Catch-22... you need to understand the plan to validate that it is a good one (unless you just blindly trust them)... however, if you know enough about finances to understand their plans, you could just do it yourself for free.

edit: just noticed REWahoo said the same thing in the next post (smart minds...)

 

[Midpack]

In the interest of a "second opinion," I got a quote of $1500 from a reputable local FA about 15-20 years ago, so not unlike your current quote given inflation since. I'd never spend that much for something I can do for myself, especially since they use standard software and every customer is getting a variation on their standard guidance. And they were a vague about exactly what I'd get as output, so I didn't follow up with them. They also volunteered they'd be willing to manage my portfolio for 1% of assets under management per year too. I just laughed to myself...

 

[dtbach]

Probably the most useful quote I have gotten from my father is that "no body has you in mind, they have their own self in mind" Unless you have upteem millions, (and then since you have upteem millions you don't need a FP) you are better off doing the job yourself.

Take an AA you can live with, and then make it more conservative as you go on. It really isn't that hard.

 

[panacea]

$2,700 isn't unreasonable but it depends on the terms of the engagement and what kind of detail you would receive. I think the problem with many plans is that they are cookie cutter and not tailored to the specific needs of the client. I would get a really good idea about what the final product would look like and specifically what questions will be answered. Fee only planning should allow you to get as much or as little as you want, to a certain extent anyway. However, some issues are inherently part of others. For example, if you want to talk about retirement planning, you really can't ignore tax planning, investments and estate planning. If you aren't familiar with the planner's work, I would ask for a free initial consultation to learn more about what they do and whether there is value in their product. I would also ask for references. Hope that helps.

 

[SumDay]

We are paying $1,600 for a fee only NAPFA, Garrett planner. I've provided her a 2 inch thick notebook, and on October 20 she'll deliver the results. And she charges $600 for a "tune-up" whenever you need it. We're in the Midwest, where things tend to be less than they are on either coast.

I have done well managing our money for 32 years, I just want to know if we have enough to retire in less than 5 years. Everything I'm running (FireCalc included) says we do, but I will feel better with a second opinion. I don't want her to manage my money going forward, just tell me if I'm on the right track. A good night's sleep is worth something. And we have some wonky real estate issues that I'd also like a critical eye to review.

Everyone else we interviewed wanted 1% of our portfolio every year, which I simply can't justify.

 

[brewer12345]

That easy, huh?

OK, sport, enlighten us on the economics of the wealth management business.

 

[Midpack]

We are paying $1,600 for a fee only NAPFA, Garrett planner. I've provided her a 2 inch thick notebook, and on October 20 she'll deliver the results. And she charges $600 for a "tune-up" whenever you need it. We're in the Midwest, where things tend to be less than they are on either coast.

I have done well managing our money for 32 years, I just want to know if we have enough to retire in less than 5 years. Everything I'm running (FireCalc included) says we do, but I will feel better with a second opinion. I don't want her to manage my money going forward, just tell me if I'm on the right track. A good night's sleep is worth something. And we have some wonky real estate issues that I'd also like a critical eye to review.

Everyone else we interviewed wanted 1% of our portfolio every year, which I simply can't justify.

WRT second opinion, you probably realize that NO one can guarantee whether you have enough, they can only give you a probability of success based on past history (which may/not be repeated). If anyone claims they can give you a guarantee, you can be sure they don't know what they're talking about (or worse) and I wouldn't give them a dime...

 

[obgyn65]

I agree with this.

Unless you have upteem millions, (and then since you have upteem millions you don't need a FP) you are better off doing the job yourself.

Take an AA you can live with, and then make it more conservative as you go on. It really isn't that hard.

 

[BobbinChina]

post is to FinanceDude

FYI, a wealth management firm would, I'm guessing, never ever hire a fee based financial planner. That is a conflict with what they do to make money. As a certified CFP myself, I can tell you that fee-based is the only ethical route AND I could never make any money in that line of work because people always want something for nothing. Therefore, they get 'free' plans from firms or individuals who will be making their money on the commissions from the products they recommend to you (life insurance, funds, etc.). So I just use my education to manage my own money but I still get a little freaked about the inability to make a living ethically in financial planning. Waah!

 

[rescueme]

Everything I'm running (FireCalc included) says we do, but I will feel better with a second opinion.

OK; you can retire.

Send me a check for my opinion ...

Seriously, I retired from a company where many of my cohorts in age and retirement assets were similar to DW/mine.

Many of them went with a planner - the same one (one started - the rest followed).

While I don't know if the planner helped or hurt their indivudial retirement plan, I do know that everybody who used the planner were still w*rking after I retired (at age 59; not early, but earlier than originally planned).

Three of us that did not follow the flock and did our own planning, using the tools available and just bouncing ideas off of each other (as we do here), all retired within six months of each other and all in our 50's.

I can't say that the go your own route we took gave us an advantage, but I would like to think that the situation just showed that there is a way (if you're willing to do your own homework) to the same end.

In all cases, regardless of the review/suggestion of the planner, it's up to you/partner to make the decision. The planner will not take responsibility if things don't turn out. Sometimes one must just put on their big boy/girl pants, and make the decision based upon what they (not somebody else) believes. If you haven't heard, there are no guarantees in life (regardless if you paid, or not ).

Just my simple POV.

 

[Helen]

I can't say that the go your own route we took gave us an advantage, but I would like to think that the situation just showed that there is a way (if you're willing to do your own homework) to the same end.

I think doing your own financial planning leads to a greater understanding which then leads to more confidence as to when to pull the trigger and retire.

I'm sure there are people who have enough assets to retire but may not know it. Plus, a FP would probably lose money once people start drawing down their portfolio, so there is no incentive for a FP to encourage people to pull the plug and retire.

 

[FinanceDude]

OK, sport, enlighten us on the economics of the wealth management business.

I have been enlightening this board for years and either folks scoff or dismiss what I say as untrue. Funny, most of them are the same folks who know nothing about the business...........

 

[FinanceDude]

I
I'm sure there are people who have enough assets to retire but may not know it. Plus, a FP would probably lose money once people start drawing down their portfolio, so there is no incentive for a FP to encourage people to pull the plug and retire.

That is an uninformed statement..........