Parts 1 and 2 of this series reviewed the various service and fee models that have all been bundled under the flat fee moniker. Finding the right advisor for you requires some reflection on what type of relationship and services you are looking for, and a fee that feels fair.
Understanding Flat-Fee vs Fee-Only vs Fee-Based
First, a word of caution related to some other common terms consumers sometimes confuse and that you are likely to come across in your research.
“Fee-only” means the advisor is compensated only by clients and does not earn commissions from the products recommended or sold. In my view, a flat-fee planner should also be fee-only. However, some commissioned professionals also use the flat-fee label: they may charge a fixed fee for a plan or a subscription for ongoing advice while also receiving commissions from product sales.
Before hiring any financial advisor, regardless of which flat fee model you choose, you should ask them if they earn any revenue outside of the fee they charge you.
It is also common to confuse “fee-based” with “flat-fee,” perhaps because both phrases sound like a fee for service rather than commissions or AUM fees. However, “fee-based” has long been defined in the industry as an advisor who charges a fee and earns commissions.
So, unless you are hoping to work with someone who earns commissions, you are not looking for a “fee-based” advisor. You are looking for a “fee-only” advisor and a specific type of fee-only advisor, depending on your needs.
What search terms should you use to find the right flat fee advisor for your unique situation?
As you’ve hopefully come to see, the term “flat fee” just isn’t specific enough for you to find the advisor you need. Instead of searching for a “flat fee financial advisor”, here are some suggestions that will help you target what you are looking for:
Do you just want a one-time plan or answer to a question? Try searching for an advisor who offers “hourly”, “project-based”, or “one-time” financial planning. Beware of advisors who offer a one-time plan with the goal of managing your money (usually for an AUM fee). If you want a true plan, and not just a sales pitch, look for firms who specialize in project work, and don’t manage investments. One term that can be helpful here is “advice-only”. This term has grown in popularity and is used by those who specifically don’t manage investments.
Are you looking for ongoing advice, without investment management? If so, some of the common language used by these firms is “subscription” or “ongoing planning/guidance”. It can also be useful again to use the term “advice-only” here to ensure you don’t get a firm who charges an ongoing planning fee but would also love to manage your investments for an AUM fee.
Are you looking for ongoing advice, with investment management, but don’t want to pay a percentage of your portfolio? Advisors who offer this service often describe their fee as simply “flat fee” or “flat annual fee”. They advertise their services using terms like “comprehensive”, “ongoing’, and “including investment management” and may use language like “no AUM fee” or “no percentage fee”.
Where to Find Flat Fee Advisors?
A Google or AI search using terms that match your preferred service model can be a practical place to start. You can also use terms specific to your situation, such as “retirement”, “tax planning”, “doctor”, “XYZ company employee” or your location if you prefer a local advisor. Many firms market to specific clientele, and you are likely to find someone who speaks to your needs.
Beyond a simple search, a handful of online directories list advisors using the service and fee models described in this series. Note that each listing has their own criteria and vetting process. Many advisors on these lists are not purely flat fee, and some use the term more as a marketing tool than a business philosophy. Every advisor, wherever you find them, should be thoroughly vetted by you.
Flatfeeadvisors.org – a network of advisors who offer ongoing financial planning, including investment management, for a flat annual fee. If you’re looking for a flat fee advisor who provides comprehensive services like that of traditional AUM advisors, this is a good place to look. However, flat fee models vary and members are not required to be fee-only, so you’ll need to ensure you are comfortable with the fee model and potential conflicts of interest.
Advice-Only Network – a network of advisors who are fee-only and do not offer investment management. If you are looking for fiduciary advice, without portfolio management, you’ll find lots of options here. Service models include project, hourly, and subscription.
XY Planning Network – a network of advisors who focus on younger clients, rather than retirees. Members must be fee-only and offer at least one fee-for-service option that doesn’t have an asset minimum – allowing them to work with a wide range of clients, regardless of portfolio size. However, many also charge AUM fees to manage investments.
Garrett Planning Network – a network of advisors who offer hourly or project-based advice. Some also charge AUM fees to manage investments, but all are required to be fee-only.
Questions to Ask Before Hiring a Flat Fee Financial Advisor
Hopefully, this series of articles has provided some useful information about the flat fee advisor landscape. I’d like to end by offering a list of questions to use when interviewing a flat fee advisor. This is not meant to be a comprehensive list for hiring an advisor (for such a list see here or here), but rather a list to help you to determine if you are actually dealing with a flat fee advisor, and if so, to understand if they offer the service and fee model you’re looking for.
- Are you fee-only? Does your firm have any other revenue source other than the flat fees your clients pay you?
- What will my total fee be, in dollars? Is it an ongoing or one-time fee?
- How is my fee calculated?
- What services are included in my fee?
- Investment management?
- Tax planning? Tax preparation?
- Are there any services you offer that cost extra?
- When and by how much can I expect my fee to change over time?
Conclusion
Flat-fee advice can make the cost of financial planning more transparent and reduce some of the conflicts created by AUM pricing, but the label is only a starting point. What the flat fee movement has actually done for the industry is open up the conversation about fees and services.
Doing so has potential to drive dramatic improvements for consumers as advisors are forced to compete on both their price and what they offer clients. The proliferation of new approaches means more good options for investors. It also means you must understand your options, ask the right questions, and spend the time necessary to find the right advisor for your needs.
Use the distinctions and questions in this series to compare several advisors, ask each one to explain their total fee and services in plain language, and choose the relationship whose scope, incentives, and cost best fit your needs.
James is the founder of SwitchPoint Financial Planning and a pioneer of the flat fee movement. He is passionate about challenging long-standing practices in the financial advice industry and refuting misconceptions about investing in an effort to help people make better decisions with their money.