How do I know what type of financial advisor is best for me and how much it costs?

In this blog, we will answer the main concerns that a person may have when they think about whether they need a financial planner or advisor, and if they do, they must know how much it will cost.

Does it make sense to work with a financial planner?

First of all, many people use the terms financial advisor and financial planner as the same thing, but that is not the case. So let’s start by saying the following:

Is a financial advisor the same as a financial planner?

Seen in a very simple way, it is not the same because:

• The financial advisor is more interested in managing or investing in your portfolio, focusing mainly on everything related to your investments in the capital market.
• The financial planner is more like a general doctor and will want to diagnose how your finances are in all their aspects, not just investments, and establish with you a plan to achieve your goals, optimizing aspects such as taxes, cash flow, investments, and insurance, among others.

So, after understanding this, the next question would be:

In what cases is working with a financial planner justified?

We could say that everyone could be interested in working with a financial planner, considering that their main job is to optimize your finances, showing you the correct path to follow. So that you avoid mistakes and can achieve the goals you have set for yourself.

If we continue with the analogy that we pointed out above, it is like saying that a person does not need to see a general doctor who will tell him what he can do to take care of his health. If he sees that you have a condition that needs to be treated, he will give you treatment.

A financial planner works the same way: diagnosing your finances, examining your investments, income and expenses, debts, and taxes. Helping you make those financial dreams measurable and controllable goals, and guiding you toward achieving them.

Of course, just like a doctor, most people seek them out because of a significant health problem. People often also seek financial planners at several key life moments:

Approaching retirement, inheriting money after a loss, going through a divorce, or facing any major financial decision.

Now, is it true that financial planners only work with the rich?

The world of financial planning has been changing substantially.

Movies paint a misleading picture of financial advisors. They show them working only with clients who have million-dollar investment portfolios or are considered high-net-worth individuals. This implies that only such wealthy clients can afford their services.

The fundamental cause of this vision is that the charging or commission scheme that most financial planners use is to charge a percentage of the money they manage for their clients.

It is understandable that a planner who is also trying to maximize his income will prefer to work with a client with a million dollars rather than someone with about ten thousand dollars. Let’s see this with a simple example: 1% of $1 million is not the same as 1% of $ ten thousand dollars.

Hence, many financial planners ask their clients to have investment portfolios containing thousands of dollars so that it makes economic sense for them.

So, if you don’t have a million-dollar portfolio, a financial planner wouldn’t work with you?

Financial planners are shifting their approach. Some now operate as consultants, offering project-based fees that reflect the complexity of your financial plan.

The only problem with this charging per project is that the amount can still be a little high for the vast majority of people since they can range from $3,000 to $6,000 on average and can be much higher.

Hence, the latest trend in the service of certified financial planners is to provide their services by the hour, allowing them to adjust to the requirements and complexities of each client.

The hourly financial planning service works the same as when you hire a lawyer or accountant. You pay them for any questions you may have, but in this case, about your personal finances.

The amount the financial planner charges will depend on the level of complexity, experience and certifications of this professional, but can range between $200 and $600 on average.

Why is it said that Hourly Financial Planning is the most fair or fiduciary?

Hiring a financial advisor who gets paid by selling you products creates a conflict of interest. They might prioritize recommending products that benefit their own commission over what’s truly best for your financial situation.

On the other hand, when you pay a financial planner by the hour, that professional will have the permanent challenge of offering you the greatest possible value through his analysis or suggestions, since he knows that if he does not achieve this, he simply will not be able to have new clients. You will easily realize that his suggestions do not provide the value you requested.

On the other hand, an hourly financial planner works like a general doctor who will already know your case, and at any time, you can consult him for simpler consultations and simply pay for the time that this requirement takes.

Who uses hourly financial planning the most?

Hourly financial planning is ideal for people who prefer to manage their portfolio themselves or for those approaching important decisions and looking for a second opinion, such as those who are already thinking about retiring and want to know if they are on the right path.

People who already have a financial advisor also use this service to get a second opinion. They want to confirm whether their current portfolio is on track to meet their goals.

Additionally, those seeking to optimize their tax strategy can leverage this service to address specific questions. For example, individuals unsure about a ROTH Conversion strategy can gain insights on the best time to start and appropriate contribution amounts.

The hourly financial planner is ideal for validating through mathematical scenarios whether those ideas or economic concerns, such as whether I should move to a smaller house or another state or whether I am making the most of the work benefits that my company gives me or If there are any other tax benefits that I could be taking and I am not doing so.

Are there many certified financial planners that provide hourly services?

Unfortunately, there are few certified financial planners who provide hourly services. The main reason is that large advisory firms realize that it is much easier to get their advisors and, in some cases, their planners to seek to raise larger amounts of money and charge a percentage of those millions of dollars than to do a job as personalized as possible. What the hourly financial planner does.

So if you have a certified financial planner who charges by the hour, take care of them; Look at the few on the market and see if many customers are looking for them.

The good news is that with the use of virtual communication technologies, it is no longer relevant whether your financial planner is in your neighborhood. You can have a consultation completely online, but always make sure it’s not one of these systems that asks simple questions and thinks it can give you suggestions about your financial destiny.

Schedule an online session with your financial planner. During the session, explain your goals and ask them to clearly outline the deliverables you’ll receive at the end of the process. Traditionally, this includes a written financial plan and a review of different scenarios.

Remember that this is your financial plan and it should answer your questions.

It should not simply be a document that shows that the planner is a very intelligent person but that he managed to understand what you needed and give you greater peace of mind and security for the decisions you are going to make.

Many hourly financial planners go the extra mile by offering support programs. These programs involve following up on your action plans for a few months to ensure they don’t just gather dust – they help you turn your financial goals into reality!