Advice only planning is a growing area of financial planning that focuses on providing financial planning services for those seeking advice without investment management. It has actually been around for a number of years, but recently the term ‘advice only’ has gained significant traction among individuals seeking out a planner. It is expected to grow significantly over the next few years.
One of the main emphasis of advice-only is that its focus is to educate and empower others in making their investment decisions vs the advisor managing the investments on their behalf. Having advice-only as an option means wider access for individuals to get the help they need as there are no net worth or account minimums, and the fee structure is typically suitable for a wider variety of people.
Who is it for?
This type of planning is suitable for those who want to gain more education over their personal financial circumstances. They likely self-manage their accounts and may just need validation that they are making the right choices instead of delegating the work to someone else. Lastly, they have unique needs not just around investments, and don’t want to move accounts or feel pressure to purchase a solution right away.
Many people who follow the FIRE(Financially Independent Retire Early) movement opt to work with an advice only advisor as they are typically cost conscious of fees when it comes to their investment accounts. Those making a significant early life transition such as getting married, first child, or starting a career may benefit from this.
What are the key differences between other advisors?
There are three primary services that advisors can offer:
Provide a product to hopefully take care of a financial need for a commission. Typically this is an insurance product or annuity.
Manage investment accounts on behalf of an individual for a fee (Often a percentage of investments)
Provide financial advice for a fee
A traditional advisor typically would offer 1 & 2.
A Fee-Only Advisor would be 2 & 3
An Advice-Only advisor would offer just 3.
If you are the type of person who would rather delegate, or struggle to implement advice and stay disciplined especially around investments, seeking a fee-only planner who offers asset management might be the more prudent choice. If you are looking for validation you are on the right path with your financial goals and decisions. You would be best suited to work with someone providing financial planning only to start, who can point you in the right direction and educate you first. Understanding these services, and asking a prospective advisor the type of services they offer is the best way to know how they will work for you and give you clarity on what you need.
What would you expect to pay an advice-only advisor?
Most commonly, advice only advisors charge an hourly rate for their services. They may also charge an ongoing fee paid monthly or quarterly depending on how often you work with them. They may also charge a flat annual fee for a specific type of review or service. Most will offer you a free consultation and provide a curtailed price to you based on your need.
Are Advice-Only advisors fee only too? Do they act as a fiduciary?
Advice Only planners act in a fiduciary capacity similar to how a Fee-Only advisor would be. While some financial professionals have a conflict of interest, advice-only minimizes them significantly as they are not compensated by a percentage of a portfolio or commission, but by the time and actual service/advice given to the end client.
A Fiduciary is someone who is legally obligated to put their best interests first for the client. They are typically held to a high level of moral accountability when offering advice or services. Advice Only Advisors and Fee-Only advisors fall under this requirement.
Where can I find an Advice Only Planner?
Advice-Only Network is a great solution for seeking out an advice only planner. XYPN, NAFPA, and Fee-Only network also are good resources, but include Fee-Only advisors as well.