Are "Fee-only" and hourly planners the same thing? Are there account minimums usually or do these types of advisors simply provide a service for a flat fee?
A firm that charges hourly fees might be best if you are looking for targeted and limited advice. This is an ideal solution if you are getting your household budget on track, need help with college planning, buying a house, basic financial planning, or some other limited scale project. Such a firm might also come in handy if you feel you are able to handle most of your investment management on your own, and you are only looking for a little guidance and advice.
It can be difficult to find experienced financial planners who will work for an hourly fee. The Garrett Planning Network can provide referrals to an houly fee advisor - but look for someone with experience, as many hourly fee only advisors are fairly new to the business. Sadly, more experienced advisors often abandon the hourly fee business, as frankly it is not nearly as profitable as the asset management business where the advisor charges a percentage fee based on assets under management. These advisors may be a good choice if you want someone to handle your investments for you, but many have asset "minimums"
They are not exactly the same thing.
Fee-only means that the advisor doesn't receive any compensation other than that received from the client. That compensation could be calculated as some percent of Assets Under Management (AUM), a flat retainer, or an hourly fee. Normally the first two are used for an on-going relationship with investment management.
Hourly planners generally charge an hourly rate (much like lawyers) and provide a plan and then the client implements the plan without on-going management.
One other note of clarification, although you didn't ask about it. "Fee-based" is not the same thing as "Fee-only". "Fee-based" advisors often receive other compensation beyond the fee they charge the client. This compensation is usually in the form of sort of commission.
NAPFA is a good source for more information on Fee-only planning and planners.
Hope this helps.
Rachel, Curt did a great job answering your question. If you are looking for some information about specific firms on their hourly rates, fee structures or account minimums there are additional places to look. If the firm is a Registered Investment Advisor they have to file an ADV Part 2 with either the SEC or the states they operate in. Here is a link to search for the RIA firm who you may be looking at: http://adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx You will want to look for the menu called "Part 2 Brochures" for this information. Andrew
Rachel--Here's how much a financial planner should cost: http://hullfinancialplanning.com/how-much-should-a-financial-planner-cost/
Rachel, As others have stated, hourly planners are generally fee-only planners. However, someone who calls himself a fee-only planner may not necessarily charge by the hour and may instead charge a fee based on assets under management. Some fee-only advisors will charge you a fee based on assets under management and provide you financial planning advice at no additional cost while other may charge an additional fee for financial planning services. Fees will vary among different firms as will the quality of advice your receive. I don't believe that there is one right fee, as you generally get what you pay for. The cheapest financial advisor is unlikely to be the best. On the other hand, the most expensive might not be the best.
As far as fees for financial plans... I am not an advocate of the written financial plan. I believe that financial planning is a fluid, ongoing process. Most people who get a written financial plan implement the plan, put it in a drawer and never look at it again. As changes occur in your life, as your goals change, as tax rates changes, as economic environments and financial markets change, your written plan will become more and more obsolete. Especially in today's economic environment where interest rates are on the rise and bonds are struggling, whatever investment plan you implement to meet your goals will need continual monitoring and periodic adjustments. Unless you are an experienced investor, I believe it's best to work with a financial advisor who will manage your investments and make adjustments as needed for you.
Finally, while it won't win me a lot of votes, I would advise you to NOT shy away from working with a fee-BASED advisor. I am an independent fee-based advisor specifically because it allows me to offer my clients every viable solution for their financial needs and objective, regardless of the method of compensation. There is nothing wrong with buying a commissioned investment product when it's the best, most appropriate alternative. Many fee-only advisors will tell you that the fee-only model is free from conflicts of interest. It's not, simply because most non-hourly fee-only advisors will never show you commissioned options that they know little about or cant' sell you. Most of the services I provide my clients are for a fee. However, every now and then, for the right person in the right situation, a commissioned product may be the best option. Especially in the area of insurance, most products are sold with a commission. So a fee-only advisor will be very limited in what he or she can show you, and may have to refer you to a commissioned advisor. I don't know of any fee-only health plans.
My advice to you is to look for a good advisor who you feel comfortable working with and comes highly recommended. I would not worry about how he or she is compensated. I know many excellent advisors from the fee-only world and many equally excellent advisors who are fee-based. Good luck.
Rachel, by now you have read the lively debate over different models of fee-only and hourly planning. I do not think I can contribute anything further to that discussion
As this applies to you, you should ask what exactly are your needs. Most advisors will offer a no-charge consultation to determine the path that is best for you. I am located just off Atlantic Ave. in downtown Delray Beach. As you are in Boynton Beach, I can tell you that there is no shortage of qualified financial advisors in Palm Beach County that would be happy to provide a complementary consultation. Aside from the academic question you are asking, it would go a long way towards helping provide you direction.
My colleagues have provided an excellent overview of the differences between fee-only and hourly planners.
Hourly planners are a sub-set of "fee-only" financial planners. The majority of "fee-only" financial planners do charge a percentage of investment market value fee or a flat fee. Furthermore, the majority of "fee-only" financial planners have a minimum fee for an hourly, flat fee or annual retainer client engagement and often that minimum fee equates to a minimum account size. If a planner has a $5,000 minimum annual fee, you don't want to hire them to manage a $100,000 portfolio.
It is important to understand and compare how much "financial planning" a financial planner does versus a broker or independent registered investment advisor. Many brokers, independent registered investment advisors and accountants market that they offer "financial planning" but only give lip service to it. Quite frankly, many financial planners are guilty of focusing too much on asset management. This is best understood by interviewing multiple advisors and asking for samples of client reports and annual or periodic reviews and updates, plus any questionnaires that the advisor uses before offering financial advice or implementing an investment portfolio.
Hiring a financial planner is an important decision so time and effort spent researching the different levels of services available and the different business models/cost structures is time well spent.
As Curt mentioned, NAPFA (napfa.org) is a great source of information about fee-only advisors. Their site also includes a "Find an Advisor" tool which you might find helpful.