Here’s what we learned by hiring a financial advisor for a fixed fee of $1,000. Rather than pay a costly ongoing assets under management (AUM) fee, we wanted to test out this increasingly popular fee-for-service advisement model. We each hired the same fee-only, advice-only advisor to evaluate our portfolios and answer our questions. We share how we found this advisor, what the process was like, the specific questions + answers we had, and who we think could benefit from such a service.
Is this the right option for you?
Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.
- As mentioned, Jason found value in working with AUM advisors in his past. For more on that and how he decided to go DIY, see “Breaking Up With My Financial Advisor?” and the conclusion, “Making the Worst Financial Mistake I’ve Ever Made?”.
How do you find advice-only planners? Below you’ll find two resources. Please note that Two Sides of FI has no relationship nor do we receive any compensation from either.
1) XY Planning Network was mentioned in this episode. As described on the site, their member advisors ascribe to fiduciary and CFP standards, earn no commissions, and require no minimum assets. They have convenient filters to allow searching by advisor specialities, including those with FIRE experience. Many work under multiple fee models, including advice-only, which can be a good source for one-time consults without any
2) Cody Garrett, CFP and advice-only planner from Measure Twice Financial, recently shared this list on Twitter. As he described it, “these 11 advisors provide comprehensive financial planning without any expectation, obligation, or even the option to manage client investments. Options for project-based, hourly, or ongoing.” You’ll note there is overlap between these resources, which makes sense. But this is the list Cody shares with prospective clients, so one can presume there’s been some personal vetting.
As we discussed in the episode, the advisor recommended some actions that we elected not to follow. Note that this doesn’t mean it was bad guidance, we just determined it didn’t fit our plans at this time.
- Increase emergency fund to 3 months living expenses.
- Consider a more conservative stock/bond mix given retirement timeline of 24 months.
- Increase umbrella insurance coverage to cover entire net worth (complicated to procure given two teenage drivers in Eric’s household).
- Purchase disability insurance (Eric considers them to be self-insured).
- Contribute to a medical flexible spending account. (Not actually that ‘flexible’ as unspent balance disappears annually which requires knowing your medical expenditures in advance).
- Consider a SPIA (single premium immediate annuity), or a rising equity glide path to cover sequence risk early in retirement. (Still evaluating).
- Consider a HELOC (pre 62) or, HECM (at age 62) to access home equity as a buffer asset. (Possible point of leverage in the future).
- Consider a Cash Balance Plan for Eric’s business (Eric researched, chose not to proceed given costs to set up + unpredictable nature of annual revenues).
- Increase umbrella insurance coverage to cover entire net worth.
- Evaluate needs for long-term disability insurance. (self-insured)
- Re-evaluate your need for long-term care at age 50 or sooner. (self-insured)
- Pay off the mortgage (Jason researched and elected not to proceed).
- Consider flood and earthquake insurance (former doesn’t apply, have evaluated latter previously and elected not to proceed).
- Consider utilizing additional risk management strategies (SPIA or rising equity glidepath, and HECM once you qualify at age 62).
- Re-evaluate partial Roth conversions as Affordable Care Act(ACA) subsidy rules change, and/or once you become eligible for Medicare at age 65 (or earlier) (deferred for now)
You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.