While exploring Reddit the other day, I came across a question about hourly financial planning fees. As many MarketWatch Picks readers write with questions about financial advisor fees, this seemed like the answer.
question: Is $265 an hour a lot for a paid planner? I recently contacted a Certified Financial Planner (CFP). He said his wife and I would discuss what he wanted us to accomplish, our goals, our risk tolerance, etc. Usually it takes him 15 to 40 hours, he said. It could be less or more, depending on how much planning you want to do.
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I have about $975,000 between personal brokerage accounts, IRAs, and Roths. My wife has $575,000. We are she is 60 years old and she is 61 years old and from 2024 she is planning to retire in 2025. At that time, you will receive approximately $5,000 per month with a 3% cost-of-living adjustment each year. Also, she receives $1,900 a month from her previous job, and when she enrolls at that point, she will be 62 and his Social Security benefits will be $2,694. We all invest in stocks, with an emphasis on tech stocks (Apple, Tesla, Microsoft, Google), with probably $500,000 of that invested in index funds. We will never need a brokerage or an IRA. My wife also owns a small business and her annual income is $50,000. We have low bills, the house is worth her $375,000, we own a rental home worth $225,000, and her income is $1,700 a month before expenses.
I just want some advice on rebalancing my portfolio. We still intend to manage the assets, but what do you think is a reasonable amount of time to do this? And how much do you think we should be paid per hour? – reddit
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answer: The very simple answer is that $265 an hour is a reasonable rate for an experienced planner, say the pros. Most hourly planners charge between $150 and $450 per hour, so the amount you pay is definitely within the reasonable range. That being said, you may be able to find lower rates. (Looking for a new financial planner? You can match with a fiduciary advisor using this free tool from SmartAsset.)
Depending on the complexity of your situation, 20 to 25 hours is a reasonable amount of time to provide comprehensive advice, says Cody Garrett, a certified financial planner with Measure Twice Financial. “Given that your hourly rate is $265, you can expect your total fees to be between $5,000 and $7,000. Assuming you choose a competent financial planner, especially when it comes to detailed Social Security and tax planning, , the tangible benefits of advice can exceed the fee multiple,” says Garrett.
Mark Struthers, a certified financial planner with Sona Wealth Advisors, agrees that $265 is a good price and that 15 to 20 hours may be more accurate. “Most experienced advisors I know charge about $300 an hour. If you really just want to rebalance and the number of accounts and investment complexity is low, 15 to 20 hours can seem like a lot. The problem we face is that clients almost always want more than what they initially say and expect everything to take 15 minutes,” says Struthers.
However, if you’re doing little basic asset allocation and financial planning, five to 10 hours may be enough, Struthers says. “Keep in mind that you’re not just paying for your time, you’re paying for your expertise…You’re not just paying for your time, you’re paying for years of experience and education.” says Struthers.
If this price is a concern, you can also ask your planner to limit the scope of your engagement to investment plans only. “Buyer beware: You only retire once, and financial mistakes can be costly. Take the plunge to make sure everything is ready for retirement. You may want to consider paying for a full plan. Once you have a complete plan, limit your costs to investment advice only,” says Certified Financial Planner, Carmichael Hill & Associates. Matt Bacon says.
In fact, it’s important to understand how much time it will take you to use this planner. “The difference between 15 hours and his 40 hours is significant. To more accurately estimate the total cost, you can set a limit on the number of hours or ask for a flat fee contract,” says the advisory firm. says James Daniel, a certified financial planner. A fixed-fee or fixed-fee advisor charges a predetermined amount annually, monthly, quarterly, or he may only do so one-time, but that amount does not directly correlate to the number of assets the client has in the portfolio. Experts say the going rate for a flat-fee advisor can range from his $2,500 to his $10,000, depending on location and expertise.
Additionally, you may need more than just rebalancing advice. Based on the information you provided, your investment portfolio has a total balance of $1.55 million, with two-thirds invested in individual high-tech stocks. “You anticipate that your annual retirement income of approximately $115,000, plus your wife’s self-employment and net rental income, will cover your desired living expenses without distributing additional retirement income from your portfolio. Even if you’re only looking for advice on rebalancing, a number of variables will influence the recommendations. Don’t miss the forest for the trees,” says Garrett. It may be beneficial to consult a tax planning professional or an estate planning professional for further guidance and to ensure you are prepared for the best-case scenario.
In fact, to make a good recommendation, a conscientious planner must consider many items and aspects of your finances, beyond simply reviewing your holdings and recommending rebalancing. “While she may not plan on needing an IRA to live on, she may become eligible for RMDs at some point and the amount could be large. So it’s important to have a plan in place to deal with them.” “It’s probably worth keeping it,” says certified financial planner Christina Guglielmetti. At Future Perfect Planning.
In cases like yours, Struthers said, it’s common for clients to also want a distribution plan, which can take several hours because they’re consolidating things like Social Security and pensions. “Things that seem easy can be time-consuming. We have had clients who took more than three hours just to complete the risk questionnaire. If you think different accounts require different risk profiles, add an additional hour or two. And we haven’t even started choosing investments yet,” Struthers says.
Having a problem with your financial advisor or looking for a new one? Email picks@marketwatch.com.
I’ve edited the question for clarity.
