Choosing to work with a financial advisor is the first step toward elevating your wealth and feeling more secure about your finances. It can turn worrying about money today into celebrating wealth in the future. Selecting what type of advisor to work with can direct your outcome. This article will explore two methods: hiring an advisor for a few hours and hiring an advisor for ongoing guidance.
Why It Matters
In an era of endless and quickly changing advice, having a personal advisor can help you tune out the noise. While an hourly planner can point you in the right direction and answer questions, after that you are on your own to take action and keep up. Financial planning is an evolving process, and it is often said a plan today is outdated tomorrow. That’s where hiring a planner for the long run can pay off. They are constantly watching for changes in the world and with your personal finances to help keep you on track.
Basics of Hourly Planners
If you feel you need a simple checkup of your finances, an hourly planner can help in these ways:
- Answering targeted questions and showing current financial projections. Topics addressed could include evaluating job offers, reviewing a portfolio, answering a tax question, buying a home, determining college savings, or starting a family.
- Pointing you in the direction to control your own plan. This can work if you are comfortable managing your finances and making the changes yourself.
Basics of Ongoing Financial Planners
If you have changing or complex finances, limited time/interest, or value steady support and accountability, an ongoing advisor can help in these ways:
- Continuous guidance by adjusting your strategy as life changes, such as a new job, starting a business, or entering retirement. This guidance can include steadying emotions during times of market chaos.
- Proactive management to make changes when needed and quickly regarding your investments, taxes, insurance, cash flow, savings, and overall progress in growing or maintaining your wealth.
- Reduced mental load by coordinating your wealth and implementing changes, freeing you up to focus on your career and do what you enjoy.
- Regular meetings throughout the year to review your progress and recommend updates.
Ongoing advisors also have other benefits:
- Comprehensive Services: Fees frequently cover more than just investment management; many bundle holistic financial planning, tax strategy, and estate planning into the fee.
- Fiduciary Duty: Many operate as fiduciaries, meaning they are legally and ethically obligated to act in your best interest, rather than pushing commission-based products or services.
- Convenience: You have an advisor who is already knowledgeable about your finances available at all times to answer questions and provide guidance.
- Proactive Management: Instead of a one-time plan, the advisor provides continuous, active management of your investments and adjusts strategies based on life changes or market conditions.
- Aligned Interests: Because they are paid by a percentage of your assets, fee-only advisors are motivated to grow your portfolio, ensuring their goals are directly tied to yours.
Having ongoing investment management can also be valuable in these ways:
- Identifying a strategy that is best suited for your growth and income needs, and your risk tolerance.
- Selecting investments based upon ongoing investment due diligence.
- Preparing for cash needs with investments that are lower risk and tax-efficient for near-term withdrawals or unforeseen cash needs.
- Evaluating stock balances to avoid having a stock become too large a portion of the portfolio, which can increase risk.
- Monitoring performance and adjusting according to fundamental changes in investment funds.
- Investing account contributions and determining investments to sell according to the portfolio objective.
- Reviewing and making appropriate choices for specialized accounts, such as college savings plans and health savings accounts.
- Considering tax impacts relative to selecting tax-efficient investments, selecting which appropriate accounts to hold assets based upon tax considerations, and taking advantage of tax opportunities.
For ongoing decisions that are not investment-related but impact a portfolio:
- Determining a Social Security strategy to enhance benefits and evaluating changes in the decision as eligibility nears.
- Keeping college savings plan contributions on track and adjusting as college nears.
- Preparing for steps to take at important milestone ages, particularly from 50 to your early 70s.
- Adjusting savings and long-term care insurance needs to address future potential medical expenses and family protection.
- Reviewing tax planning annually and calculating projections to determine possible tax-saving transactions in the current year while considering your forward-looking taxable income.
- Monitoring cash flow for significant changes in income and spending to determine adjustments in your financial plan that may be appropriate.
- Evaluating debt such as payment plans, refinancing, or obtaining a loan if needed.
- Reviewing insurance policies and whether changes should be made as life changes.
- Monitoring estate planning structure and working with your attorney to evaluate updates as laws change.
- Apprising you of specific recommendations or changes as situations evolve.
- Providing more informed, quick answers to your questions because of having the knowledge from monitoring your finances.
- Being proactive with more frequent contact through meetings, phone calls, and emails without worrying about hourly charges.
Understanding and managing your personal wealth is not an easy undertaking. Having the depth and knowledge from an ongoing wealth manager can take the burden off you and keep you on track as times change. It can also save you time from having to start over each time you contact an hourly advisor. We invite you to contact us to learn more about our wealth management services.
Quick Reference: Hourly vs. Ongoing Planning
| Feature | Hourly Planner | Ongoing Planner |
|---|---|---|
| Primary Cost | $250-400 an hour or around $3,000 for a simple plan, plus potential hidden commissions. | Usually based on the value of the portfolio, known as Assets Under Management or AUM. |
| Objective | Answer financial questions today based on current information. | Manage portfolios and update financial plans throughout the year. Proactive alerts of changes that could benefit or alter your plan. |
| Strategy | Often reactive (transactional) to current situation. | Proactive and holistic (lifestyle-based). |
| Complexity | Often best for those with simple finances or small portfolios. | Multiple factors to weave together and update often, such as planning for cash flow, taxes, estate, insurance, and investments. |
