Let's make believe you did have a Financial Planner

[kcowan]

My DW have discussed the afterlife if I kick off, and I have suggested that she switch to a diversified index strategy with low cost MERs. Because she views what I do as works (individual stocks and bonds), she is willing to accept a lower return. Plus I carry $500k life insurance to compensate for the lower returns and loss of pension.

Having said that. I would love to find the ideal planner that I described upthread because we would start using them now.

 

[FinanceDude]

What I'd like is to pay for a product: An indepth analysis that will likely produce results. I sit down with the planner for 30 minutes, show him my current setup and my goals. He figures out the optimum strategy, and compares it to how I would have done, net of taxes, over X number of Firecalc-like periods of 20 years. He tells me the results and enough info to know he did it fair and square, but not enough info to give away how he did it. Then, he presents a bill. If we agree on a price, he delivers a product: A report showing how to achieve the optimum results and the rationale for same. I think something like this, well documented with a step-by step implementation plan, would be worth several thousand dollars to me, and I'd pay it without a peep. And, I think the right guy/gal could crank one of these custom reports out in 8-10 hours of work once he/she had the tools in place.

Don't know how we could give you enough to "have a taste", but not "give it all away". And to do that on an hourly rate?

I guess one way would be to have a flat fee for consultation, like $150 or something. Then the client and I could go over everything, which might take 90 minutes to 2 hours, or more depending on the complexity of the situation.

Then, I would run different scenarios for the client, and present the best strategy. The question is: Would YOU implement the strategy, have ME implement it, or what?

 

[samclem]

Don't know how we could give you enough to "have a taste", but not "give it all away". And to do that on an hourly rate?

I guess one way would be to have a flat fee for consultation, like $150 or something. Then the client and I could go over everything, which might take 90 minutes to 2 hours, or more depending on the complexity of the situation.

Then, I would run different scenarios for the client, and present the best strategy. The question is: Would YOU implement the strategy, have ME implement it, or what?

If customers saw and liked the sample product the FA had done for someone else, they'd proably be willing to pay a relatively modest flat fee for the consultation ($100 to $200). I would think this would be necessary for the FA to not only pay for his time but also to screen out folks who are unlikely to buy the finished product.
--In my case, I'd want the product to be something I could implement myself. I'd probably want to sit down for an hour with the FA every year or two to discuss course corrections due to changes in tax laws/changes in my goals/to consult with him on ideas I've had on how to optimize return). The FA would probably have me "hooked" as a client, as the FA built the plan and knows the reasoning behind it. Others might want the FA to implement their plan and keep it going every year, and I would think this could be done for a flat annual fee. (The annual work on the part of the FA would probably involve portfolio rebabalncing to stay within the bounds of the plan and to minimize taxes, and to provide consolidated info to the client to allow tax preparation by the client or others. Maybe 2-4 hours of work for most situations?).

No load funds, no wrap fees-- just payment for a service.

 

[FinanceDude]

If customers saw and liked the sample product the FA had done for someone else, they'd proably be willing to pay a relatively modest flat fee for the consultation ($100 to $200). I would think this would be necessary for the FA to not only pay for his time but also to screen out folks who are unlikely to buy the finished product.
--In my case, I'd want the product to be something I could implement myself. I'd probably want to sit down for an hour with the FA every year or two to discuss course corrections due to changes in tax laws/changes in my goals/to consult with him on ideas I've had on how to optimize return). The FA would probably have me "hooked" as a client, as the FA built the plan and knows the reasoning behind it. Others might want the FA to implement their plan and keep it going every year, and I would think this could be done for a flat annual fee. (The annual work on the part of the FA would probably involve portfolio rebabalncing to stay within the bounds of the plan and to minimize taxes, and to provide consolidated info to the client to allow tax preparation by the client or others. Maybe 2-4 hours of work for most situations?).

No load funds, no wrap fees-- just payment for a service.

I guess that's why I'm going to get the CFP, to be able to offer the flat fee, and keep my fee business if they want me to implement. Seems to be the way things are moving............

 

[retire@40]

If customers saw and liked the sample product the FA had done for someone else, they'd proably be willing to pay a relatively modest flat fee for the consultation ($100 to $200)...Maybe 2-4 hours of work for most situations?).

No load funds, no wrap fees-- just payment for a service.

Just a hunch, but I don't think you are going to get to many qualified FP to give you 2 to 4 hours of service time for $100 to $200. I think I pay more than that for an average auto mechanic.

What's the going hourly rate these days for a good FP?

 

[FinanceDude]

Just a hunch, but I don't think you are going to get to many qualified FP to give you 2 to 4 hours of service time for $100 to $200. I think I pay more than that for an average auto mechanic.

What's the going hourly rate these days for a good FP?

As low as $75 an hour, and I know one guy who charges $350, but he operates in a complex niche with very high net worth folks..........

Most are around $100-$150 an hour............

 

[saluki9]

Just a hunch, but I don't think you are going to get to many qualified FP to give you 2 to 4 hours of service time for $100 to $200. I think I pay more than that for an average auto mechanic.

What's the going hourly rate these days for a good FP?

The planner here charges $250/hr

 

[FinanceDude]

The planner here charges $250/hr

Yeah, but you guys cater to the over $5 million crowd, right??

 

[saluki9]

Yeah, but you guys cater to the over $5 million crowd, right??

yup! Compared to their accountants and lawyers thats way cheap

 

[FinanceDude]

yup! Compared to their accountants and lawyers thats way cheap

True, but you guys run it kind of like a private bank or trust company. If a guy/gal was going to offer it to the "masses", I think the numbers I posted are in the ballpark.

Problem is, you would need a LOT of clients doing them to make money after expenses.............

 

[bongo2]

Most are around $100-$150 an hour............

That shocks me. If someone charges a percentage, or takes a commission then they must make 10 times that, don't they? Why would any FP go the fee for service route if they make so little?

 

[FinanceDude]

That shocks me. If someone charges a percentage, or takes a commission then they must make 10 times that, don't they? Why would any FP go the fee for service route if they make so little?

Economics of the situation. I know of two CFP's that quit because they couldn't get enough fee for service income to survive.

Unless they offer RIA services, or a fee arrangement, I don't think a lot of them will survive.............

 

[New Thinking]

Economics of the situation. I know of two CFP's that quit because they couldn't get enough fee for service income to survive.

Unless they offer RIA services, or a fee arrangement, I don't think a lot of them will survive.............

Just throwing in my two cents..This says so much and is what it all boils down to. Clements and others often promote going to a hourly-fee or retainer financial planner. Yet, the financial planner needs tremendous volume to make a decent living. Thus we see many more commission-based FAs/FPs and AUM-Fee-Based FPs than we would otherwise. "By the hour-fee based is a business model that is difficult to make work "across the board".

 

[FinanceDude]

Just throwing in my two cents..This says so much and is what it all boils down to. Clements and others often promote going to a hourly-fee or retainer financial planner. Yet, the financial planner needs tremendous volume to make a decent living. Thus we see many more commission-based FAs/FPs and AUM-Fee-Based FPs than we would otherwise. "By the hour-fee based is a business model that is difficult to make work "across the board".

I doubt anyone would keep an FP on retainer, unless they had a huge family foundation or something.

Most if not all hourly FP's are CFPs. There are only about 20,000 CFPs in the US, as opposed to 600,000 registered securities folks.

 

[saluki9]

That shocks me. If someone charges a percentage, or takes a commission then they must make 10 times that, don't they? Why would any FP go the fee for service route if they make so little?

A good fee based RIA can make from $200-500K around here. To do that you need to be an expert at client building. Thankfully the folks I work for have separated the portfolio management and client building activities because I would starve on the latter. I know I will never make the high end of that range, but I know that I can do a good job on the former.

Yes, a CFP can make more on asset fees as opposed to hourly. Its nowhere near 5 or ten times but it is more. Despite what people here think, asset management is a very time consuming process when it's your business.

 

[Ready-4-ER-at-14]

Is there any evidence that fee based RIA's that earn 200-500K have yields for their clients than mutual fund managers who seem to earn 300k to 5 million a year and seldom beat the stock market indexes for more than what might be statistically coin flipping chances?

I realize this may sound insulting, but along with all the disclaimers of results that people in the financial industry make, I personally have yet to find anyone at the broker ranks who knew what to buy consistently. Even if they got lucky at selling me something, they never had an exit strategies. "Buy it and keep it with me" seemed to be the mantra.

 

[CyclingInvestor]

I enjoy financial planning (for myself), and would no more pay someone else to do it than I would pay someone else to ride my bike for me.

 

[traineeinvestor]

I enjoy financial planning (for myself), and would no more pay someone else to do it than I would pay someone else to ride my bike for me.

+1

That said, some types of investors would benefit from some handholding:

1. those who are just starting out, need to be educated and don't trust random strangers on the internet - someone to teach how to invest, what to invest in, what not to invest in etc

2. those who tend to let their fear and greed get the better of them - someone to calm people down in times of irrational exuberance and irrational panic

At some point, I will have to start teaching my children about all this.