Which Clients are a Good Fit for On-Going Comprehensive Financial Planning Service?

by John Cooney on May 7, 2019

fee-only financial planner, retirement, Taxes, personal finance, investing

Financial planners and the services they offer continue to evolve.  In the current financial planning environment, there are three main ways a financial advisor gets paid.  They can be paid a commission on a product they sell; they can be paid a fee based on a percentage of the assets they are managing for you (referred to as Assets Under Management or AUM); or they can charge a fee for comprehensive financial planning.  This last fee can be charged on an hourly basis or on an on-going basis.

Who Should Use a Commission-Based Advisor?

                If you are looking to purchase a specific product, such as a mutual fund, annuity, or life insurance policy and not looking for advice on your comprehensive financial situation, you may want to use a commission-based advisor.  You should still do your due diligence and make sure you understand why they are suggesting this specific product for you, and how much they will be paid if you purchase what they are selling.  These advisors may have access to some institutional products that you could not purchase on your own.   You also need to keep in mind that there may be conflicts of interest on the advisor’s part.  Ask the advisor about any conflicts before deciding to make a purchase.

Who Should Use an Assets Under Management (AUM) Advisor?

                AUM is one of the more popular ways for advisors to be paid by their clients.  The services these advisors may offer can vary and you will want to make sure you understand both what they do and what they charge.  Hiring an advisor to manage your investments can make sense if you do not want to worry about the on-going tasks of keeping the portfolio well-balanced and diversified.  These advisors may or may not offer more comprehensive services outside of investment management, but you will need to clarify that with them.  At a minimum, you will want to understand their philosophies and practices around active versus passive management, how often they re-balance the portfolio, and how they minimize the effect of taxes.  Typically, an AUM based advisor can be most beneficial to clients who have accumulated a decent sized portfolio and want the expertise of an investment manager to protect that investment.  They may have fewer financial decisions to make on a routine basis that do not involve their investment portfolio.  Many of these advisors can also have a minimum amount that a client must have invested in order to take them on as clients, making them unavailable as advisors to many people who are younger and in the accumulation phase.  However, these younger, less affluent clients often are in more of a need for financial planning assistance than those with million-dollar portfolios; which brings us to the final fee option I will talk about in this article, on-going comprehensive planning.

What is On-Going Planning?

                Unlike commission-based planners and investment management, both of which are focused on a client’s investments, on-going comprehensive planning takes a look at all the financial aspects of a client, focusing on seven main areas; cash flow and budgeting, investments, tax planning, educational funding, risk management (insurance), retirement planning, and estate planning.  Typically, with respect to the first area, cash flow and budgeting, this is an area that is affected every time you move through a life transition.  These life transition points include college graduation, getting your first job, changing jobs, getting married, having children, getting divorced, paying for education, buying a house, retiring, and claiming social security amongst others.  The fact is that many of these events occur to people and couples still accumulating assets, making them time intensive for a financial planner, but not usually with enough assets to make them ideal clients for those charging against assets under management.  This is where an on-going financial planner can fit in.  By establishing an on-going relationship, the planner is there for the clients as they move through these transition points.  By paying a monthly (or quarterly) fee, the client now has access to the expertise of the planner when the client actually needs it, and at a price that is affordable to the client and makes it profitable for the planner.  It is literally changing who can now have access to the financial expertise of a financial planner.  The clients that are best served by an on-going comprehensive planner are those who are going through or expecting to go through multiple life transition points.  At each of these points, they are going to have to make adjustments to their spending, make decisions on how to protect their growing assets or families, and how to project and save for their future goals.  How these advisors charge is going to vary, for me, I charge 1% annually of the client’s total income, paid monthly.  This was a practical decision for me, the clients going through these life changes are the ones I want to help and by structuring my fee around their total income, I can be there for these clients when they need the advice the most.

How Does On-Going Planning Help?

                In an earlier article, I talked about what I do and offered a service calendar  to show you what the service looks like on an on-going basis.  When it comes to how I help, I can’t do better than talking about the 6 core values a financial planner provides as articulated by Mitch Anthony.

Core Value 1 – Organization - Take control of your financial life starting with your cash flow and understanding how the cash flow impacts the larger picture of taxes, investments, insurance, and retirement planning.

Core Value 2 – Accountability – Work with you to understand your financial goals and provide the accountability to ensure your financial actions align with your financial values.

Core Value 3 – Objectivity – Emotions can play a large role in your financial decisions; a good advisor is there to give you an outside look at the issues you face.

Core Value 4 – Proactivity – Identifying those life transitions that are upcoming and working with you in advance to put you in the best position to navigate through them.

Core Value 5 – Education – Understanding your situation and providing you the information and resources about your options in order to make educated decisions.

Core Value 6 – Partnership – We work with you and on your behalf to help you achieve your financial goals and objectives.  With partnership comes a commitment to transparency, about any conflicts of interests and pricing.  You will always know why we are making the recommendations we are making and how much and what you are paying for.


Where are you at in your financial life?  What financial service model fits you the best? 

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