personal finances

Working with a financial advisor who charges no fees

By Mark Davenport 16 September, 2023 3 mins read

These are some important things to keep in your mind when you're considering working with a financial advisor who charges a fee. First, consider the cost of working as a fee-only advisor. Fee-only advisors charge a flat rate, an hourly rate or a percentage from the assets under their management. Although it may be more expensive to work with a fee only financial advisor, basic advice may not cost as much.

NAPFA is an online database of fee only financial advisors

Fee-Only financial advisers are professionals who chose to become members of NAPFA. The association promotes client-focused financial planning and professional competence. It has existed since 1982 when the Society of Independent Financial Advisors gathered in Atlanta to discuss ethics and the dilemmas of accepting commissions. The group realized that putting clients' needs first might be in conflict with their own financial interests so they decided to form NAPFA.

NAPFA is a database of fee-only financial advisers. It includes many financial professionals who are licensed to work in America. It has strict standards for its members. They must meet continuing education requirements and submit financial planning for peer review. NAPFA also requires that its members work in fee-only arrangements. This minimizes conflicts and ensures that financial planners act in the best interest of their clients.

Cost of working with a fee-only financial advisor

Flat fees are charged by fee-only advisors. This can range from $10,000 to $20,000 per year. While some advisors charge only a percentage of the assets managed by them, others may require that their services be paid a monthly subscription fee. While the fees for these subscription services are subject to change, they generally require a onetime fee for the initial start-up period as well as a monthly fee for support. Fee-only advisors may offer limited services such as reviews or annual meetings, or they may only be able to meet with clients one on one.

Fee-only financial advisors might charge a flat fee for an initial financial planning session. However, fees can vary depending on the experience and services provided. In the first year, an initial comprehensive financial plan may cost $1,500 to $3,000, with a timed or retainer rate of $150 to $400 per hour or $1,500 to $7,500 per year. A fee-only advisor may also charge a percentage to manage assets, which can be anywhere from 1% up to 2%.

Fee-only financial advisors can earn professional designations

Financial certifications or professional titles are an indication of a person’s financial expertise. Most require hundreds of hours of coursework and rigorous exams. Financial advisors with professional designations can differentiate themselves from those without such credentials. The medical school certifications are proof that a professional has passed written examinations and been thoroughly vetted. Charles Sizemore (chief investment officer, Dallas-based Sizemore Capital Management) is a certified Financial Planner (CFP), and a Certified Life Underwriter (CLU), which are the gold standards for life insurer agents.

Chartered Financial Consultants (CFP) are among the most knowledgeable and versatile types of financial advisors. CFP's can advise on any type of financial problem, from taxation to retirement plans. CFP's follow strict fiduciary standards, which means they put their clients' interests before their own. Applicants must complete a demanding course load, pass a rigorous exam, and have at least three years of experience in financial planning before they can take the test.

FAQ

What is wealth management?

Wealth Management refers to the management of money for individuals, families and businesses. It covers all aspects related to financial planning including insurance, taxes, estate planning and retirement planning.

What is investment risk management?

Risk management refers to the process of managing risk by evaluating possible losses and taking the appropriate steps to reduce those losses. It involves the identification, measurement, monitoring, and control of risks.

An integral part of any investment strategy is risk management. The goal of risk management is to minimize the chance of loss and maximize investment return.

The following are key elements to risk management:

Identifying sources of risk
Monitoring and measuring the risk
How to control the risk
Manage your risk

How to choose an investment advisor

Choosing an investment advisor is similar to selecting a financial planner. Experience and fees are the two most important factors to consider.

It refers the length of time the advisor has worked in the industry.

Fees are the price of the service. It is important to compare the costs with the potential return.

It is crucial to find an advisor that understands your needs and can offer you a plan that works for you.

Where can you start your search to find a wealth management company?

If you are looking for a wealth management company, make sure it meets these criteria:

Has a proven track record
Locally located
Offers complimentary consultations
Offers support throughout the year
Is there a clear fee structure
Good reputation
It is easy to contact
We offer 24/7 customer service
Offers a wide range of products
Charges low fees
Do not charge hidden fees
Doesn't require large upfront deposits
Make sure you have a clear plan in place for your finances
You have a transparent approach when managing your money
Makes it easy to ask questions
Does your current situation require a solid understanding
Learn about your goals and targets
Is available to work with your regularly
You can get the work done within your budget
A good knowledge of the local market
Is willing to provide advice on how to make changes to your portfolio
Will you be able to set realistic expectations

What are the potential benefits of wealth management

Wealth management offers the advantage that you can access financial services at any hour. Savings for the future don't have a time limit. You can also save money for the future by doing this.

You can choose to invest your savings in different ways to get the most out of your money.

You could invest your money in bonds or shares to make interest. You can also purchase property to increase your income.

If you use a wealth manger, someone else will look after your money. You don't have the worry of making sure your investments stay safe.

Statistics

According to Indeed, the average salary for a wealth manager in the United States in 2022 was $79,395.6 (investopedia.com)
If you are working with a private firm owned by an advisor, any advisory fees (generally around 1%) would go to the advisor. (nerdwallet.com)
These rates generally reside somewhere around 1% of AUM annually, though rates usually drop as you invest more with the firm. (yahoo.com)
As of 2020, it is estimated that the wealth management industry had an AUM of upwards of $112 trillion globally. (investopedia.com)