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You have, let us suppose, a fair amount of savings yet an uncomplicated financial life. Where do you go for investment advice?
A planner who bills by the hour would be an ideal choice. You’d quickly work out an investment allocation (stocks and bonds, domestic and foreign). You’d get a sense of how much money you can safely spend in retirement. If you have uninvested cash, you’d find out whether you’d get the best mileage out of it by paying down a mortgage, saving for college in a 529 account or converting an IRA to a Roth.
With, hypothetically, a 15-hour engagement at $300 per, you’d pay $4,500 initially. And then? Until you have a big life change (divorce, inheritance, job loss) you might get by with only a few hours a year in check-up sessions. That could be vastly cheaper than the usual arrangement for advisors, which has you paying an annual percentage of your assets.
The problem with the hourly solution is finding an advisor willing to provide it. The vast majority of the country’s 310,000 financial advisors get either sales commissions or annual percentage fees. It’s easy to see why they prefer such compensation. The dollars are bigger.
I’ve decided to make it easier for people to find hourly planners by publishing a list of them. So far 84 have raised their hands. I’m hoping the list will grow. Here are the names, followed by some caveats.
Do understand what this list is, and what it isn’t. With the exceptio n of one whom I profiled in Forbes magazine, I haven’t vetted them. In selecting a money manager, exercise the diligence that is due. Interview candidates to find out how much they know about finance.
You’ll get allocation advice from any money manager. It’s important, but it’s not what you’re paying for. After all, you can get a model portfolio for free by copycatting a suitable Vanguard Target Retirement fund. Or you can use one of the portfolios of exchange-traded funds that I have published here or here.
No, you’re paying for insights that can’t be cookie-cuttered. Your advisor needs to know about things like marginal tax rates, loss harvesting, backdoor Roths, health savings accounts, restricted Social Security claims, Fafsa and how to calculate the aftertax benefit of a mortgage refinancing.
Hourly help is not right for everyone. If you have either small assets or large complications (examples: special-ne eds child, recent divorce, business with employees) you might be better off with a planner who bills a percentage of assets.
Another sort of saver who should probably seek out the percentage planner is the one who gets emotional about money. If you worry about the economy or might panic in the next market correction (it’s imminent), then the traditional percentage deal has a virtue. It allows you to get a reassuring phone call without fretting that a meter is ticking.
In this list I have included planners who mix hourly fees with flat fees (such as $2,500 for a financial plan) but excluded those who have percentage clients along with hourly clients. I list only one city and one planner per firm; many firms have more than one.
Some planners have a national practice, connecting with faraway clients via Skype. That might work for you, but if you live in a state with an income tax there’s much to be said for an expert familiar with that tax. By way of example: If you live in New York and are still working but over 59-1/2, you should be doing at least $20,000 a year of Roth conversions. Does your planner know that?
A lot of the advisors above are members of the Garrett Planning Network, not surprising since this group requires members to at least offer hourly billing. (Note that my list excludes GPN members who also undertake percentage work.) A searchable list of Garrett planners can be found here; my profile of founder Sheryl Garrett is here.
Almost all of the experts on my list have the “Certified Financial Planner” designation. The CFP board maintains a list of 42,000 CFP holders here . You can filter results to exclude those who collect sales commissions but, unfortunately, cannot search for hourly-fee advisors.
The National Association of Personal Financial Advisors, which is limited to advisors not collecting commissions, has a list here. Again, you can’t break out the hou rly people.
If you are a planner who would like to be included on the Forbes list, send a note to williambaldwinfinance-at-gmail-dot-com. Include name, name of firm, address of principal office, website and a statement that your practice is predominantly hourly and that you do not accept percentage fees. The current list covers names sent in by 5 p.m. on July 17. When I get enough new names I’ll update the list.