Who are flat fee financial advisors?

Before answering why a flat fee financial advisor (or financial planner) may be right for you, let’s understand who a flat fee advisor is. Just a few years ago, I hadn’t heard the term flat fee advisor, much less knew who they were.

Fee-Only Financial Advisor

A fee-only advisor is someone who is independent and does not receive commissions and only receives compensation from their client. Fee-only is a step in the right direction, towards a more fiduciary experience. Flat fee is a further step in that direction.

Flat Fee Financial Advisor

A flat fee advisor is a subgroup of fee-only advisors. This means that they are also commission free and that they only receive compensation from their client. What separates them from other fee-only advisors is that they base their fee on the work being done and their professional experience.

A flat flee advisor does not charge based on your net worth or portfolio size. Their fee does not increase when the market goes up or you contribute more towards your retirement. Why should it? They don’t have the power to change the markets or a crystal ball that reads the future. If they did, they would be doing something other than financial advising. See our chart, comparing cumulative fees of an assets under management (AUM) advisor and a flat fee advisor. Fees can make a big difference in your portfolio!

Why flat fee advisors?

Flat fee advisors are quickly becoming popular and for good reason! They provide transparent pricing for the most possible conflict-free advice and they focus on comprehensive planning. Tie all of this together and you have a service that often provides the best return.

Benefits of Flat Fee Financial Advisors:

Transparent Pricing:

Flat fee advisors either charge by 1) the hour, 2) a subscription (monthly, quarterly, or annual), or 3) by project. This is very similar to how accountants, attorneys, and many other professions charge. This provides clients with the ability to easily understand how much they are paying for the advisor’s service.

Conflict-Free Advice:

Flat fee advisors have the least conflicts of interests and provide the most transparency. The motivation to take more time to complete work or provide more work than necessary is the only conflict. This conflict is true of most professions. It’s also the easiest to spot. While we may not know exactly how much work something may take, we can make a pretty good estimate. We can also decide what services we need.

Focus on Comprehensive Planning:

Flat fee advisors use boring index funds that are proven to most often provide their clients the highest return in the long run. In fact, research supporting this received a Nobel Prize in 2013. While managing assets using index funds takes time and is important work, flat fee advisors have more time to focus on comprehensive planning including retirement planning, tax planning, employee benefits planning, estate planning, and life events like buying a house or having children. It’s much easier to reduce your taxes through prudent tax planning than it is to beat the stock market!