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Pay an Hourly Rate for Financial Advice & Consultation: When might it be in your best interests?

| April 08, 2018
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Why should paying an hourly rate be available? Freedom of Choice!

Below are 8 specific and maybe compelling reasons why paying an hourly rate for financial consultation intellectual capital might be in the best interests of some.  The main reason is simple - freedom of choice. Paying an hourly rate might help reduce or eliminate paying too much for things that aren't needed or wanted right now by the client or prospective client. The reason(s) why paying an hourly rate might not be available at all -- or publicized -- might have to do with the Financial Folks - the practitioner's goals - not the clients. 

8 reasons why it might be in your best interests to pay an hourly rate for financial consultation / advice

  1. Fiduciary-level written second opinion of your current planning & providers done with no conflict of interest by an experienced CFP®- Certified Financial PlannerTM Professional at an hourly rate only.
  2. No obligation - legal, moral or ethical -- written or implied -- to do any other financial transaction
  3. Complete and separate disclosures about fees - costs - expenses - compensation.
  4. Comprehensive Financial Plan available but not required
  5. Different providers for different tasks & responsibilities.
  6. Solution just for a specific issue.
  7. Investment manager you are satisfied with is a specialist and only does investment management
  8. Accessibility - No dollar or asset minimum required for hourly financial consultation 

Why pay an hourly rate for financial consultation & advice?

1. Hourly Rate Fee-Only Fiduciary Written Second Opinion - no Conflict of Interest

Might a written second opinion make sense? Maybe.  If a written second opinion is marketed as "free" or "included," is it really just a sales template? Or is it truly objective, comprehensive and in clients' best interests? It could be  If it is, then it took a professional -- at least a "paraplanner" or someone even more qualified -- some time to prepare it.  So it was not "free." Maybe the recipient paid. That payment might have just been bundled with some other charge. Or, if the recipient was not a client when s/he received it, then someone else "paid" or absorbed the cost in some way - maybe the practitioner or the existing clients.

2. No other obligation to do any other product or service business - "Unbundled."

It is possible, maybe even probable, that other financial providers "bundle." They will accept "X" dollars for AUM - "Assets Under Management." And they will include some financial consultation - maybe even financial planning.  Maybe even highly competent financial planning.  If you pay for planning / advice only at an hourly rate, then you only buy what you need.  And you can potentially pay a more competitive rate for other services like asset or investment management.

3. Complete and Separate Disclosures - Fees - Expenses - Compensation

Some providers include multiple services and / or products for one all-inclusive fee.  This structure is currently widespread. One possible result of this structure is a lack of clarity to the client / customer of the pricing - fee - expense -cost of each of the separate products and services.

4. Comprehensive Financial Plan available but not required

Some providers might not use the word "comprehensive." They might not use the word for a variety of reasons.  One of the reasons might be that while they do perform some aspects of financial planning, they do not actually offer a comprehensive financial plan. So they don't want to say they do.  Can every American adult benefit from comprehensive financial plan? Clearly not.  Can more people benefit than have actually had one done?  Or updated.  Yes, I think so.

5. Different providers for different tasks and responsibilities

A provider might provide top quality service in one category.  And not even offer another category -- or provide run-of-the-mill service.  Some providers of some products and / or services do not offer financial planning at all - might not even be licensed to offer it.  Other providers might offer financial planning but not charge separately for it.  Might not do it comprehensively if you want that.  Or specific solution-based if you want that.  Paying hourly enables you the potential client to customize what you wish to receive.

6. Solution to a specific issue

At times a specific situation can arise where a client needs specific expertise.  That client might have other things in place that do not need to be reviewed.  While it is fiduciary to know what all the pieces are, it can not be a 100% requirement to analyze everything every single time.  That client might correctly feel s/he is better off just paying hourly for answers to their specific timely situation / questions.

7. Investment manager that you are satisfied with is a specialist and only does investment management

In baseball, winning the "Triple Crown" is a rare feat.  And that only applies to hitting - not fielding - base stealing - throwing - etc. Like many kinds of skill and expertise, the more time you spend at it, the more accomplished you might become.  Investment management is not a trivial pursuit.  It can be solely the life's work for some professionals.  IMPO - In My Professional Opinion doing comprehensive and / or solution-based financial planning isn't better or worse than being a pure Investment Manager -- but it is different.

8. Accessibility - No dollar minimum for fiduciary-level hourly consultation

Financial Folks exist in many flavors.  Registered Reps meet suitability criteria. Insurance folks are usually licensed by individual states. RIAs - Registered Investment Advisors -- are required to follow the Fiduciary Standard. Some RIAs might require a minimum dollar amount invested with them to accept a client. That dollar minimum might not be possible or readily accessible for some.  Even if that dollar minimum is possible, it might not be in clients' best interest to go in that direction. And some RIAs might specialize only in investment management - explicitly. Perhaps the RIA spends 95+ per cent of their time on investment management, and only a small percentage on financial planning. 

Some clients' best interests might be met best with the availability of paying by hourly rate for a fiduciary level financial consultation / advice.  

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