The Index Card: Why Personal Finance Doesn't Have to Be Complicated

by Helaine Olen

You want to seek out an advisor who works on a fee-only basis. This means the advisor is paid by you—and only by you. That payment can take a number of forms: Percentage of assets under management: This is an annual fee based on the amount of assets you are seeking advice on. The percent can range from as little as 0.15 percent for some of the online advisory services to 2 percent. (By the way, we think 2 percent is way too high a price to pay for financial advice.) Many advisors charge a sliding scale, with the percentage charged falling as the amount gets greater—for example, 1 percent charged for the first $500,000 and then 0.5 percent on the rest of the sum. Flat fee: This is the financial advisor equivalent of a prix fixe meal. The financial advisor agrees to charge you one rate for a package of agreed-upon services. Perhaps that includes a budget review and overall financial plan. Or maybe it’s a get-out-of-debt package. Hourly rate: You sit down with a financial advisor. He starts a clock. You pay by the hour for the advice. This can cost as little as $50 an hour for a financial coach, the sort of person who doesn’t make investment recommendations but can help you devise a budget and get-out-of-debt plan, to $250 to $500 an hour for someone with a certified financial planner credential. If you’re used to getting a service “for free,” it’s hard to pay real money for it. We understand that. But it was never free advice. You only thought it was a complimentary service....