Financial Planning

Looking for a Flat Fee Financial Advisor?

By  Brian Thorp

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What is a flat fee financial advisor? If you’re preparing to hire an advisor, learn if an advisor who charges a fixed cost is right for you.

A growing number of financial advisors offer services for a flat fee as an alternative to traditional pricing models (e.g., charging you 1% of the value of your portfolio managed by the advisor). Especially as your net worth grows, you may find a flat fee compensation arrangement can save you thousands of dollars each year vs. an advisor who is paid a percentage of the assets they manage for you. And, of course, the less money that goes to your financial advisor means more money available for you to spend in retirement.

If you’re thinking about hiring a flat fee financial advisor, it’s important to look under the hood to understand what services are offered and how the fee is calculated. For example, a flat fee charged by some financial advisors may include developing a financial plan for you but not investing your money on your behalf. Other flat fee financial advisors might include investment advisory services.

And just because a financial advisor charges a flat fee doesn’t mean every client will pay the same rate. In many instances, the flat fee might be calculated based on your income, portfolio size, and/or the overall complexity of your individual circumstances.

What Services Will I Receive for a Flat Fee?

Flat fee financial advisors will typically outline exactly what is included in this planning service, with different tiers for more comprehensive planning. For example, the flat fee may include creating a detailed financial plan for your debt, goals, investments, and more. Be sure to ask the financial advisor upfront if they will implement the plan for your investments on your behalf or if they will leave it up to you to follow the details of the plan.

In certain instances, you may only require a flat-fee financial advisor’s work one time (in which case, you may want to consider an hourly financial advisor, though the same financial advisor may offer both pricing models and should steer you to the pricing model likely best for your individual needs).

How Much Does a Flat Fee Financial Advisor Really Cost?

Clients of flat fee financial advisors often work together for many years, where the flat fee is often billed quarterly. The cost of hiring a flat fee financial advisor can vary significantly from $1,000 to $10,000 per year (or more), depending on the scope and detail of the financial plan provided, whether or not investment management is involved, and the complexity of your circumstances.

Should I Hire a Financial Advisor Who Charges a Flat Fee?

If you plan to establish a longer-term relationship with a financial advisor who charges you a fixed cost each year, a flat fee financial advisor may be an ideal solution for you. This is especially true for affluent clients with larger asset balances above $1 million who are seeking ongoing investment management and planning in retirement.

ASK THE EXPERTS

We asked flat fee financial advisors to offer their perspectives on when and why people may want to hire a financial advisor who charges a flat fee. Here’s what they said.

Don Rudolph FLAT FEE CIO is Your Fixed Fee Chief Investment Officer

For affluent investors, your advisor fee can “make or break” your retirement income plan as a 1% fee charged on your investments can devour over 30% of your after tax investment income each year in retirement.

Now, thanks to advancing financial technology, a low fixed fee is rapidly replacing the 30-year-old legacy percentage on asset (AUM) advisor fee and can transform your “income outcome” in retirement.

Today’s low fixed fee offers clients greater transparency and control over their annual fee and, unlike legacy percentage on asset fees, fixed fees do not rise each time the market goes up or when you add to your investment account.

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Don Rudolph | FLAT FEE CIO

TJ van Gerven, CFP® Helping Equity Compensated Employees Plan For Financial Independence

While no type of fee model is perfect, the flat fee model is one of the most transparent and fair advisor-client compensation methods. It helps to remove the conflict of interest of “looking to gather your assets,” as well as a variety of conflicts around paying down debt vs. investing. With a flat fee model, you always know what you’re paying and what you’re paying for. It also allows you to work with an advisor regardless of your assets.

A flat fee model may not make sense for you if you’re looking for a one-off engagement. In that case, you may be better served by an hourly advisor.

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TJ van Gerven, CFP® | Modern Wealth Builders

📍 Click on a pin in the map view below to discover flat fee financial advisors who can work with you to develop a personalized financial plan. Or click the Grid option to view these advisors in a directory.

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Expert Insights: What are the Benefits of Hiring a Flat Fee Financial advisor?

Elizabeth Alf, CFP® Enlightened Financial Planning

Flat fee advisors can be a great option for younger clients who might not meet the asset requirements for advisors who charge on AUM. This allows younger clients to get the important financial advice that will set them up for early success. I also feel that a large part of the value of a financial advisor comes from the planning work and so tying a fee to invested assets and market movements does not truly align with the value of services.

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Elizabeth Alf, CFP® | Clerestory Advisors

Michael Reynolds, CSRIC®, AIF®, CFT-I™ Socially Conscious Financial Planning & ESG Investing.

I love the flat-fee model because, in my opinion, it is the most conflict-free. For example, if a client asks – “should I invest this money in my brokerage account or buy a rental property?” – under a flat-fee model they can be reassured that my answer is truly un-biased because neither option is tied to my compensation.

I think flat-fee works well for everyone but especially for those with substantial assets. The AUM model would lead to ever-increasing fees but the flat fee model is a more fair way to bill them since the size of assets doesn’t necessarily correlate to more complexity or effort on the part of the advisor.

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Michael Reynolds, CSRIC®, AIF®, CFT-I™ | Elevation Financial

Kelly Klingaman, CFP®, RLP® Financial Planning for Professional Women & Dual-Career Couples

One example of a flat fee compensation model is an advisor that provides ongoing financial planning with investment management for a flat annual fee that’s determined at the start of the engagement based on the complexity of the client’s situation. The flat fee might be revisited each year and adjusted to account for any increased complexity in the client’s financial life, or even simply to make an annual inflation adjustment.

There are quite a few benefits of hiring a financial planner that is compensated this way. A flat-fee model like this offers a way of ensuring that clients have proper awareness of what they’re paying at any given time, and the planner is fairly compensated for the ongoing work. It is more transparent and links the fee directly to the value of overall financial guidance being delivered to clients and not just to the management of assets. This also allows more families to start working with a financial planner during their 30s and 40s because they can afford to pay a flat fee out of their cash flow.

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Kelly Klingaman, CFP®, RLP® | Kelly Klingaman Financial Planning

Are You a Flat Fee Financial Advisor?

👋 Hi there! We’re excited to help more people understand the benefits of working with a flat fee financial advisor. And we want to help connect people to the best financial advisors for their individual needs. If you offer services for a flat fee, we encourage you to join our growing community of financial advisors featured on Wealthtender so we can feature you in this guide soon. Click here to learn more and get started.

About the Author
A headshot of Brian Thorp, the founder and CEO of Wealthtender

About the Author

Brian Thorp

Brian is CEO and founder of Wealthtender. He and his wife live in Texas, enjoying the diversity of Houston and the vibrancy of Austin.

With over 25 years in the financial services industry, Brian is applying his experience and passion at Wealthtender to help more people enjoy life with less money stress.

Connect with Brian on LinkedIn

Disclaimer: To make Wealthtender free for our readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a natural conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers. Learn how we operate with integrity to earn your trust.