With Scope, Broad Can Be Good

Paul Morrone |

By Paul Morrone, CFP®, CPA/PFS, MSA

It’s rare that someone wakes up in the morning and out of nowhere has a revelation that they need to enlist some professional help to get their financial household in order. Often, people seek out advisory firms after a triggering event such as, marriage, birth, death, retirement, business sale or even after getting whacked with an unexpected tax bill. Other times it is more of a slow burn, where they know they are in over their head (and probably have been for a while) but don’t know where to start. Those that already have an advisor may be looking elsewhere due to service issues or a perceived lack of competency when discussing complex topics. Regardless of what the catalyst is to begin searching for an advisor, the key is to have an expectation of what you want to get out of the relationship.

It’s all too often that individuals want quick answers to not-so-simple questions. How will this affect my taxes? When should I take social security? How should I draft my will? Can I retire? These are all questions that appear simple but require thorough analysis to answer. Furthermore, anyone giving advice on a whim is not giving you the respect that you deserve as a client. Many factors need to be evaluated to give thoughtful and appropriate recommendations regarding any facet of an individual’s financial situation and making decisions based upon limited information can have negative consequences down the road.

Additionally, the likelihood of an individual only needing advice on one topic reviewed in a vacuum is highly unlikely because of how intertwined the various areas of financial advice are. For example, life insurance. I find it hard to believe that it is easy to determine (a) the right type of policy (b) the appropriate amount of coverage or (c) the correct ownership/insured/beneficiary structure (among other things) without comprehensive data gathering and analysis. This necessitates the requisite knowledge in survivor income and cash flow planning, estate planning, income tax planning and retirement planning, to name a few.

The only way to know what you’re getting into is to shop around. Be diligent in your first meeting with a new planner and be armed with pointed questions about their compensation and how they get paid. While some folks may be hesitant to pay for advice, this is a world in which you get what you pay for, and if you’re not careful you may simply just get ‘sold’ something that is not necessarily in your best interest.

There is also a lot of ambiguity as to what is a fair price point for a financial plan due to the numerous different compensation methods used by advisory firms. While there is no one ‘best’ method, what is clear is that the well-run firms focus on advice and not on rate of return. Access to a seasoned advisor with the appropriate credentials doesn’t come cheap. A recent study conducted by Michael Kitces published in April of 2019 evaluated industrywide pricing of financial planning services and found that the median price for a comprehensive financial plan was approximately $2,400, which can vary greatly based upon your geographic location, the advisor’s experience, credentials and complexity of your personal situation.

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