What's the difference between a financial advisor who is paid for their services versus one who isn't? I'd like to start a relationship with someone who can listen to my goals, take a look at my debts and assess my financial picture (objectively) to help me achieve my goals, but I don't want to pay a fee. Am I being unrealistic? — Mary Eliza, Georgia
Financial planning is a really important process to go through. It entails a lot of work both for those who are going through it and the advisors they seek out to help them objectively assess their current status. If done properly, it can take hours to just gather information needed, complete a detailed questionnaire and copy the documentation necessary to make a thorough assessment. This includes looking at all things financial — your debts, assets, income, cash flow, insurance, retirement plans — in addition to discovering your goals, what obstacles are in the way, what holes are in the plan and analyzing necessary decisions.
In my experience, most clients describe financial planning as a “painful but necessary process.” And yes, it is a process. It is also dynamic because life is everchanging. Think of a financial plan like a road map for a trip you’re planning — sometimes you will get a flat tire, there will be traffic or you miss your plane. You’ll need to adjust.
I liked how you recognized that it is important to develop a relationship because as your life evolves and changes, so may your plan. Ergo, it would be important to have a relationship with a trusted advisor to evaluate and modify your plan from time to time.
Every financial advisor is compensated in one way or another. The real differences lie in how the advisor is compensated for the preparation and implementation of the financial plan. Some advisors provide financial planning services for a flat fee, which typically covers an initial meeting, evaluation of data, recommendations and followup to discuss plan output and implementation. In this case, a client should expect to pay an annual fee to maintain the plan; remember, a good financial plan will evolve and require modification as life and circumstances change.
An advisor who does not charge a “fee” for a financial plan is typically compensated through the purchase of investment and insurance products recommended as a result of the financial planning process. Essentially, the advisor will earn a percentage of the fee charged on each product that is purchased.
Is it unrealistic to want a plan but not to pay for it? Yes. Ask yourself, “Would I work for free?” Free advice is often worth the price that you have paid for it.
Binney Wietlisbach has worked in the financial services industry since 1985 and has been affiliated with The Haverford Trust Company since 1992, acting as its President since 2008. She is a member of the Executive Committee, a voting member of the Investment Selection Committee and a member of the Board of Directors of The Haverford Trust Company. Binney is also the Vice President of Haverford Financial Services. She is the mother of two teenage children, an avid runner and plays on the first golf team for Gulph Mills Golf Club.