save for his three kids’ college education. Moreover, like many people, he didn’t-and still doesn’t-have a lot of time and energy to devote to financial planning. “I’m very busy with my scholarly activities. But I also need to have downtime,” Zuberi says. “And when I come home, I like to talk to my kids and my wife about what happened in their day and not talk about money.”
At this point, not talking about money is a luxury, of sorts, for Zuberi. But it’s one you can ill afford if you’re trying to hire a financial planner. In fact, this is the one area in which you can’t mince words during your selection process. Ask advisors to tell you specifically how they expect to be compensated for the services they provide. What are the hourly costs involved? Do they operate on commission? Do they charge a flat fee or get a percentage of the assets they manage? Or is their fee structure based on some combination of these elements?
Take note: when you hire fee-only planners, you don’t have to deal with individuals who make commissions selling you specific products. The NAPFA recommends fee-only advisors exclusively. Whatever type of planner you choose, the bottom line is that you need to clearly understand how-and how much-the advisor will charge you. You should also know every way that the planner could possibly make money from you.
Fees are based on several variables, the most important of which is geography. Northeast residents, for inst
ance, should expect to pay more than people living in the Midwest. Aside from location, other factors that can influence fees include the experience of the financial planner you hire, the size of his or her firm and the organization’s reputation. Of course, retaining the services of a financial planner from a big-name Wall Street investment bank is likely to cost you more than hiring someone from a smaller, lesser-known firm. But rest assured: you can find reputable, diligent professionals at either end of the spectrum. According to ICFP President Buie, who also owns Financial Planning Group, a firm based in Falls Church, Virginia, “You can expect fees to run from a low of $50 or $60 per hour up to a high of $400 or $500 per hour.”
Grady, the American Express financial planner, says that the flat-fee-plus-commission structure is the one most often employed by his firm’s 8,000 advisors nationwide. Depending on a client’s needs, a financial analysis plan can cost anywhere from $250 to $5,000-plus. Fee structures can be flexible enough in that clients with roughly $100,000 in assets, for example, are charged a 1% management commission, Grady adds.
For many people, though, the costs involved in hiring a pro are well worth it-especially if the planner helps you to achieve your goals. That was the case for another one of Grady’s clients, Cynthia Stewart, a manager at Chase Manhattan Bank in Wilmington, Delaware.
Stewart, who is 45 and single, had long dreamed of owning a home. So when a local YMCA