You pay a monthly membership for your gym membership and your Netflix account…why not your financial planner’s services?
There’s a new wave of planners offering just that. Here’s what you need to know:
Hourly Vs. Monthly Fees
Charging by the hour has been a common payment approach with certified financial planners (CFP.) But the hourly model has its limitations, which is where the monthly services come in.
First, some of the pros of the hourly model. Charging hourly opens up services to just about anyone. The financial commitment looks more affordable to someone who is worried about shelling out money consistently for financial advisor services. It’s also an opportunity to invite more clients who may just need help in one area of their financial life, like paying off student loans or dealing with an inheritance.
That being said, a monthly retainer has its own benefits. This arrangement really allows a financial advisor to get to know your entire financial life. When it comes to money, it’s a challenge to pry your finances from your personal life, your goals and your motivations. Working with a financial advisor on a monthly basis allows you to build a relationship with that person. Once they have the full story, they can better assess what financial moves will work best for you and your future life.
I like to break the monthly planning process into six steps or areas of focus:
- Define Your Wants
What are your future goals? These could be:
- Secure retirement
- New home
- Paying down student loans
- Maximizing investment performance
- Understanding company benefits
- Exercising stock options
2. Strategies for Your Income
How will your money best be spent?
- Roth vs. traditional IRA
- Health savings accounts
- Utilizing company benefits
- When to exercise stock options
- Deferred compensation plans
- Exercising stock options
3. Develop Investment Portfolio
Determine a plan of action for your investments.
- Identify time horizon
- Determine appetite for risk
- Build portfolio across all accounts
- Use low cost index funds for diversification
- Rebalance when portfolio is out of line
4. Create Efficiencies
All the information you need come tax season.
- Determine appropriate withholdings
- Identify ways to reduce tax liability
- Optimize tax return
- Roth conversions
5. Protect Against Risks
Back up your hard work against the unforseen.
- Determine all risks that could derail plan
- Define life insurance need
- Protect paycheck against disability
- Safeguard assets from care facilities
- Liability protection for home and auto
6. Proactive Monitoring
A continual assessment of your financial health.
- Ongoing review of investments
- Semi annual check-ins
- Guidance on implementing plan
- Available when things change
Who Should Go Monthly?
For some people, an hourly plan will work just fine. But for others, the monthly retainer is absolutely worth the investment.
A monthly plan works well for people who want ongoing guidance, or are considering changes like a new job or starting out in a new area of investment. Obviously, the investment has to be worthwhile in terms of your income. So if you’re interested in moving forward on a plan, head over to the contact page and I can help you determine what would work best for you.
Read more about financial planning at the Solari Financial blog posts on how to pay for a financial planner, do you need a financial planner and four misconceptions about working with a financial planner.